with Tuan Hai Ewe, Oil & Gas Advisor, INTSOK Malaysia
2009 was a year of global economic downturn. How did this impact the Malaysian economy, especially the oil & gas activities?
Even during the downturn prospects have been good. The only changes that we observed were some projects being slightly delayed. PETRONAS is committed to keeping the same level of spending. Malaysia works on a Production Sharing Contract system, which is why many companies have to remain active in order to fulfill their contract agreements. Gumusut as well as Kebabangan have been somewhat affected but it is not too significant. When the price of oil went down the prices of raw materials and services did not go down as fast, thus created challenges, but services providers have actually understood PETRONAS’ and PSCs constraints. The outlooks are good in Malaysia but the biggest challenge will be in terms of oil and gas reserves of the country, which is why PETRONAS has been internationalizing its activities.
What has hit Malaysia the most: the Asian financial crisis of 1997 or global financial crisis of 2009?
The 1997 crisis has had more impact on Malaysia. The country was actually quite prepared for the latest one. A good indicator is the prices in real estates. In 1997 prices went down really far and this time around many investors had been waiting for the prices to go down to pick up some good properties but this was not the case. It is also an indication that there are many people with cash in their pockets, so to speak!
Malaysia has developed several legislations, among them the National Development Policy. How has the economy changed through these policies and how was business affected?
There have been several policies in place, but they have not brought any major changes on the business scene. To a foreign eye it could look like only the name has changed. The idea is for the government to take away this policy once Bumiputera have reached thirty percent national equity, but based on the government statistics it hasn’t reached that level yet and therefore has been extended.
How does this legislation on the integration of Bumiputeras influence the operations of companies in the oil & gas industry?
I believe you are referring to the Bumiputera policy, which is linked to the New Economic Policy that was launched in the early seventies. Bumiputeras are the Malays and the other indigenous people in the country. This policy applies mostly to government contracts. Take the oil & gas industry as an example, a strategic industry for Malaysia and in which PETRONAS – a fully government owned company- is the owner and regulator in the upstream sector. Any company that wants to provide services/products to PETRONAS or the PSCs has as a condition to have majority Bumiputera equity. Most foreign companies have difficulties, initially, to understand this when they enter Malaysia with products that PETRONAS is interested in buying that they need to have a licence from PETRONAS to sell. Alternatively, a foreign company can appoint a Malaysian company, which is licenced by PETRONAS, as its agent. It is also one of my roles as INTSOK Advisor to advise and be a kind of a matchmaker between Norwegian companies and the thousand of Malaysian companies registered with PETRONAS. The other roles I play include evaluating these potential partners, select them and present them to the Norwegian companies. The final choice will be left to the Norwegian company to do, since business cannot be successful without sound human relationships and future partners need to be able to talk with one another.
What were the reasons behind the creation of INTSOK in Malaysia?
I have been heading the then Norwegian Trade Council in Malaysia (now known as Innovation Norway) since 1984. From the very beginning I have been working and supporting Norwegian companies in the oil & gas sector. Three years back, when INTSOK – which is an oil & gas partnership organization in Norway – realized that an important number of its members were established in Malaysia, it decided to classify the country as a “priority country”. Since I have been working a lot within the oil & gas industry and therefore have established a strong network within the sector and PETRONAS, INTSOK decided to appoint me its Oil & Gas Advisor for Malaysia, devoting some thirty percent of my time for them.
You have more knowledge than a Norwegian in the local market. As a Malaysian, how do you manage to advise them without falling within a cultural gap when advising Norwegian companies?
Cross-culture is always a challenge. My past twenty six years working for Innovation Norway, traveling to Norway at several times a year and having established working relationship with many Norwegian companies, have put me in a much better position to understand Norway and her people. Being a Malaysian, I am able to help them to understand Malaysian business culture and to advise them on what to do and whom to talk to. Norwegian companies are here to do business with Malaysians, and that is where my local knowledge becomes useful. Norwegians like to go straight to business, whereas Malaysians need to socialize, get to know their partners and build trust before going into business. Most of the time it is not the best technology that wins a contract, it is more than that. You can be the best but if you do not have the human elements it will not work. There is a need for mutual trust. It is therefore our task to help companies to become successfully when entering the Malaysian market.
I have been working in the oil & gas almost since the day I started my professional career. Along the way, I made friends with people in PETRONAS and do not talk about business with them all the time thus making relationships easier. Moreover, I have a different position since I am not a sales person and I have no specific product to sell. In my position and as INTSOK representative I am trying to introduce unique technologies from Norway that can make a difference for Malaysia. In that sense you can say I represent Norway’s commercial interests as a whole. Moreover having been working with PETRONAS for a while, having organized joint capacity building seminars and training sessions with them, we have established a trust relationship.
What is the main challenge faced by Norwegian companies when entering Malaysia?
There are many challenges. There are plenty of international companies present in Malaysia, and many of them offer similar technologies and therefore it is a competitive market. Of course if you have unique technologies, for example EMGS, the market is less crowded and the market entry is easier. But for most companies, it is very important to build network, know whom to talk to and how to sell to the people inside. Norwegians are too eager to sell their products and may not realize that business in Malaysia takes time. They also cannot be selling something from Norway, and will have to show they are serious by either having an agent in Malaysia to back them up, or having joint venture company. One needs to be patient, demonstrate that you are serious and committed to the country.
Your role as INTSOK is to inform Norwegian companies on the regulations and news impacting the industry in Malaysia. What are the new trends, the hot topics, in Malaysia today?
Deepwater is one of the most interesting areas. There has been the successful development of Kikeh, the next one is Gumusut, and there are six or seven projects in the pipeline. PETRONAS wants to build Malaysia as a deepwater hub. Deepwater is an area where the two countries can cooperate. Norway and Malaysia started their oil and gas industry at about the same time, but Norway has gone a bit further in the development of deepwater and can lead the way for Malaysia. Norway is a small country, with a small population, not threatening, which is comforting for Malaysians. The second area of development is CO2 management. If you look at the gas fields in Malaysia there are many with high CO2 content, up to 60 per cent, and it is an issue on how to develop these fields. INTSOK has organized a seminar on CO2 management during the official visit of the Crown Prince and Crown Princess to Malaysia. Looking at the CO2 content, it is much higher in Malaysia than in Norway, thus pose a bigger challenge. It is one of the areas for joint research and development for Malaysia and Norway, between the University Technology PETRONAS (UTP) and universities and institutions in Norway. As you may also know Norway is extremely strong in R&D, and spent about NOK3.3 billion last year in R&D. Norway is good not only at researching, but especially in bringing the research to the business world or commercialization, and that is where they can be useful to PETRONAS. It is also very important to know how to extract more oil from the existing fields, enhancing oil recovery etc. But this is not a unique challenge since every country is facing this at the moment. To sum up, I would say that deepwater, CO2 management and R&D are the three areas for potential collaboration between Malaysia and Norway.
How would you rate the attractiveness of Malaysia for Norwegian oil & gas companies in the region?
Malaysia is at the top of the list for South East Asia, even though Indonesia is getting attractive now that the authorities are getting their acts together in terms of regulations. If you look at the priority countries in INTSOK’s list, which is an indication of interest of its partners companies, Malaysia is definitely in a strong position.
There is indeed a need of Norwegian expertise in terms of deepwater. How can Norwegian companies help the development of this area in Malaysia?
Aker Solutions has state of the art facilities in Port Klang, where they invested $100 million. FMC Technologies has established operations in Johor, it is an American company but with deepwater and subsea center in Norway, is also very strong in Malaysia. There are also companies such as EMGS specialized in deep water but also looking at shallow waters. PETRONAS is interested in having Norwegian service providers establishing in Malaysia to support their move toward building the country as a service hub for the region.
On the other hand Norway is trying to develop its LNG sector with development of Snovit or Melkoya, and Malaysia is the second LNG exporter in the world, having the largest LNG plant in Bintulu. Where can Norway learn from Malaysia’s expertise?
Norway can definitely also learn from Malaysia. Companies providing technologies to Malaysia learn how to apply their technologies elsewhere, and use or adapt them under different conditions. Sharing experience is both ways, Malaysians learn from Norwegians and vice versa. It also involves exchanges in human resources, with training of Malaysians in Norway where both nationalities can learn and teach each other.
Do you think that in the future it would be possible to see Malaysian companies taking over and telling Norwegian companies they do not need them anymore?
I would see this as a positive development. In this industry, when it comes to technology, one always has to go forward and come up with new technology, not to stay still or else one would be left behind. It is indigenous to Malaysia to encourage joint ventures for the development of new technology, which is extremely positive.
Statoil has developed internationally, bringing with it its own services providers. Now that PETRONAS is developing its global strategy, do you believe there will be opportunities for Malaysian service providers to develop to piggy back on PETRONAS?
It has happened in the past, and will certainly happen again. It is not only Malaysian companies, but also Norwegian companies working in Malaysia. When PETRONAS works with a company in its home country and is satisfied its products and services, the company should find opportunity in the international markets where PETRONAS is operating. That is why we are telling companies that are starting operations in Malaysia that they should not view opportunity in just one country alone, Malaysia, but to see opportunity in the thirty plus countries where PETRONAS has operations.
Which companies do you believe will emerge as giants, becoming the equivalent of Aker or Roxar in Malaysia?
In this matter your guess is as good as mine! I read that a number of Malaysian companies were getting contracts internationally. SapuraCrest and Scomi have been successful internationally. Other companies to watch include UMW, Dialog and KNM.
What would be your pitch line to explain the complementarities between Norway and Malaysia and INTSOK’s role?
There are many SMEs from Norway which have come up with great innovative technologies, and Malaysian companies can benefit from cooperating with these companies. Norwegian companies can help in developing the industry and give it more value added. INTSOK is here to link them together and become a kind of match maker.