28 January 2015MXLT 02/20151 GRAND BALLROOM, THE MAGELLAN SUTERA HARBOUR RESORT KOTA KINABALU SABAH 13 th & 14 th April 2015 Day 2 Paper III: “Sabah Oil.

MXLT 02/2015 128 January 2015

GRAND BALLROOM, THE MAGELLAN SUTERA HARBOUR RESORT

KOTA KINABALU SABAH13th & 14th April 2015

Day 2 Paper III: “Sabah Oil and Gas; A Sustainable Future for Sabah SMEs”, Dato’ Paduka Udani Bin Dato’ Seri Mohamed Daud, Group Executive Chairman, MaxEnergy Group

OPPORTUNITIES AND GROWTH IN THE OIL AND GAS INDUSTRY IN SABAH

MXLT 02/2015 228 January 2015

Day 2 Paper III: “Sabah Oil and Gas; A Sustainable Future for Sabah SMEs”The future potential of oil & gas production within Sabah provides a unique opportunity for SMEs to participate and thrive together with this coming growth.

This paper seeks to share some thoughts and observations for SMEs and entrepreneurs in Sabah to start in the Oil & Gas industry and some key criteria to have a successful start-up and create a sustainable business in the Oil & Gas industry.

OPPORTUNITIES AND GROWTH IN THE OIL AND GAS INDUSTRY IN SABAH

328 January 2015 MXLT 02/2015

Since 2005, a common definition for SMEs has been endorsed by the National SME Development Council (NSDC).In July 2013 a new SME definition was endorsed due to the many developments in the economy since 2005 such as price inflation, structural changes and change in business trends.

1. ‘Manufacturing’ refers to physical or chemical transformation of materials or components into new products.

2. ‘Services’ refer to all services including distributive trade; hotels and restaurants; business, professional and ICT services; private education and health; entertainment; financial intermediation; and manufacturing-related services such as research and development (R&D), logistics, warehouse, engineering etc.

3. ‘Others’ refer to the remaining 3 key economic activities, namely:

(i) Primary Agriculture

(ii) (ii) Construction

(iii) Mining & Quarrying

414 April 2015

Sabah Oil & Gas production being driven by the Deepwater fields being developed and potentially to be discovered providing at least a 30 year production horizon.Murphy, Shell, KPOC, PCSB have current or coming productionThe recent Bestari discovery by JX Nippon will spur more exploration

Block R Bestari 1 7Apr15JX Nippon, Inpex, Santos, PCSB

Oil Pay 70 met. Water Depth 1400 m

interest

Source: SEDIA

Sabah’s Oil & Gas Entry Point Projects are ongoing currently focus on the West Coast : SAMUR I & II, SOGT, SSGP, KK & Kimanis Power Plants. East Coast to come.

Sabah Petrochemical Industry Master PlanThe State Government had identified SOGIP as the dedicated park for oil and gas industry, therefore a Master Plan is necessary to be produced with specific focus to SOGIP

LD Re-Gas TerminalSOGIP Ph1 – SAMUR and Ph2 - Mitsui

SOGT & SSGP

Kimanis PP

Lahad Datu PP

Invest Jobs

RM 5.4 b 3000

Invest Jobs

RM4.6 b 5,128

Invest Jobs

RM 1.2 b 3500

Invest Jobs

RM 1 b 3300

Investment

RM 1b

Jobs

3300

Kota Belud Supply BaseProposed Development for a

integrated Oil & Gas Base FacillityOil Pay 70 met. Water Depth 1400 m

Sabah State & PETRONAS have foundation initiatives acting as catalysts to spur the development and growth of the Oil & Gas industry in Sabah by providing Entry Points for SMEs

BUILDING KEY ONSHORE FACILLITIES & SAMUR

1

DEVELOPING HUBS TO BUILD CRITICAL MASS i.e.SOGIPKota Belud Supply Base

2

Manhours Worked Globally Malaysia

Oil Companies 14 % 20 %Contractors 86 % 80 %

The Oil & Gas industry globally is very dependant on the contractors community to support it’s projects and operations.

Of the 4000 + companies providing services & products across the E&P value chain about 60 % are Malaysian SME Cos

Pipeline Construction & Maintenance

1 : 20

Production Operations

1 : 20

Technology Development

1 : 1

Plant Construction

1 : 100

SubSurface Geoscience

50 : 1

Drilling & Drilling Services

1 : 30

The mix varies dependant on activity

Offshore Installation & HUC

1 : 50

Plant Maintenance

1 : 50

Production Maintenance

1 : 50

Major Activities in the Oil & Gas industry Ratio of Engineers to Skilled Manpower

SAFETYSAFETY SYSTEMS & CULTUREOn Paper, In the Mind, With Heart

1

COMPETENCYSAFE, SKILLED & TECHNICALLY COMPETENT WORKFORCE.

2

CAPABILLITYWORK PROCESS & METHODOLIGIESEQUIPMENTREPORTING & DOCUMENTATION

3

1. Owner OperatorHands On Management Technically Knowledgable

2. Strategic PartnershipAccess to workforceCompetency & Capability Building

3.`Phased GrowthEnsure Safe Service DeliveryBuild on existing Competency & Capability

STARTING UPSabahan SMEs need to meet the key requirements of the Oil & Gas industry and to fulfill the MTR of the relevant PETRONAS LICENSE SWEC code requirements

1. Owner OperatorHands On Management Technically Knowledgable

2. Strategic PartnershipAccess to workforceCompetency & Capability Building

3.`Phased GrowthEnsure Safe Service DeliveryBuild on existing Competency & Capability

SUSTAININGTo sustain and grow the business Sabahan SMEs have the opportunity to align with the future plan developments and initiaives within Sabah and Malaysia.

UPSTREAMOffshore Shallow Water Facility Maintenance & Minor FabMarine SupportEOR/IORDeepwater Specialist Services

DOWNSTREAMContracting for Plant Construction & Plant Maintenance & TurnaroundsSpecialist & Skilled services Logistics & LiftingMechanical, Electrical, Instrumentation

11

Similar Developments in other oil states

14 April 2015

Kertih IPC PETRONAS’ Integrated Petrochemical Complex (IPC) is located within the PETRONAS Petroleum Industry Complex (PPIC) in Kertih, Terengganue. Receiving gas feedstock from the fields offshore Terengganu, the Kertih IPC principally consists of ethylene-based petrochemical plants. The plants located within this IPC include two ethylene crackers, a polyethylene plant, an ethylene oxide/ethylene glycol plant, a multi-unit derivatives plant, vinyl chloride monomer/PVC plants, ammonia/synthesis gas plants, an acetic acid plant, an aromatics complex and a low-density polyethylene plant. These plants are owned and operated mainly on a joint venture basis with various foreign partners with the technological expertise and experience, financial strength and market access to add value to the business.The petrochemical plants are integrated with the common shared infrastructure facilities and other related process plants, including PETRONAS' six gas processing plants and the Kertih Refinery at the PPIC. The IPC is supported by a storage and distribution terminal with a throughput of approximately 2.7 million tonnes per annum (tpa). The supporting Kertih marine facilities include six berths that can accommodate chemical tankers of up to 40,000 dead weight tons.

Ethylene Malaysia Ethylene (September 1995)

Polyethylene Malaysia Polyethylene (May 1995)

Vinyl Chloride (M) Vinyl Chloride Monomer, Polyvinyl Chloride (PVC) (March 2001)

PETRONAS Ammonia Ammonia / Syngas (January 2001)

BP PETRONAS Acetyls Acetic Acid (November 2000)

Aromatics Malaysia Aromatics (July 2000)

Optimal Olefins (M) Olefins (Second Cracker) (January 2002)

Ethylene Glycols Ethylene Oxide, Ethylene Glycol (February 2002)

Optimal Chemicals (M) Ethylene Derivatives (April 2002)

Petlin (M) Low Density Polyethylene (February 2001)

12

Similar Developments in other oil states

14 April 2015

Gebeng IPC The Gebeng Integrated Petrochemical Complex (IPC), is an integrated self-contained petrochemical complex comprising principally of propylene-based petrochemical plants and centralised utility facilities. The plants include an acrylic acid/acrylic esters plant, an oxo-alcohols complex, a butanediol plant, an MTBE/propylene and polypropylene plant as well as a propane dehydrogenation plant.In addition to the PETRONAS and its joint-venture plants, the Gebeng IPC is also host to a number of multinational chemical companies, such as Amoco Chemicals, which owns and operates a purified terephthalic acid plant, and Eastman Chemicals, which owns and operates a copolyester plastic resin plant.

BACKGROUNDLocated 25 km from Kuantan Town and 5km from Kuantan Port.The development programme for Gebeng Industrial Estate is based on

• Industrial Estate Development Indicative Plan (1996 – 2005)• North Kuantan Development Zoning Plan• Gebeng Industrial master Plan• Petrochemical Industry Master Plan for Gebeng Industrial Estate

MTBE Propylene (December 1992)

Propane Dehydrogenation Propylene, Catalyst (May 2001)

Polypropylene Polypropylene, plastic (November 1992)

BPC Acrylics Complex Crude acrylic acid (July 2000)

BPC Oxo-Alcohols Syngas (July 2001)

BPC Butanediol Complex Polyurethanes & polybutylene terephthalates (January 2004)

13

Similar Developments in other oil states

14 April 2015

KSB 1982

Pg.13

Kemaman Supply Base (KSB) start operation in 1982 as onshore support base dedicated solely to service and supplies the offshore petroleum operations.

It was specially designed and developed as a comprehensive logistic supply base for Peninsular Malaysia’s offshore petroleum exploration and production industries.

There are more than 220 petroleum supply and service companies with varying degree of manufacturing and technical service capacities operating at KSB.

KSB Fast factsLocation Kemaman, Terengganu

Duration 1982-2015

Services •Berthing quay (360 meters with a depth of 8.0 meters which can receive 5-6 vessels at any given time) and a twin finger jetty providing additional berthing facilities to layup 2 additional supply vessels.•Rental of office spaces housed within 3 administration office blocks•42 units general warehouses•2 units explosive bunkers.•Cargo Handling Equipment

Other Services Bunkering facilities, Silos, Supply portable water, 24h security services (Auxiliary police), Liquid Mud Plant (LMP)ASB 1996

Asian Supply Base Sdn. Bhd. (ASB) is a one-stop center for logistics support center designed specifically for the activities of exploration, development and production of oil and gas. It also provides services to companies outside the oil and gas industry. The terminal operates 24 hours a day, 365 days a year. Located only 6 kilometers from the town of Labuan, base covers an area of 108 acres, including 16.5 acres of yard area of the pipe.

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P i o n e e r E n g i n e e r i n g• Founded in 1997 and currently headquartered at the

heart of Kuala Lumpur city, Pioneer Engineering Sdn Bhd (PESB) is a leading service provider and innovator in Malaysia Oil & Gas industry.

• Awarded of a Topside Major Maintenance contract by ExxonMobil in 2010 for all Exxonmobil’s offshore platforms, Talisman in Heat Exchanger Maintenance for all offshore platforms, NDT Inspection contract by PGB & PCSB

• Headquarters in Kuala Lumpur is supported by three strategic bases in Paka, Puchong and a workshop in Kemaman Supply Base

• PESB has an impressive track record of providing maintenance, repair, inspection and improvement works for Oil and Gas facilities in offshore and onshore

• PESB’s asset and capabilities include Construction & Maintenance works (Upstream & Downstream), State-of-the-art advance NDT inspection equipment, dedicated team for Heat Exchanger Specialized Maintenance, DOSH certified repairer for Boiler & Unfired Pressure Vessel, Experienced and competent technical staff and Project execution from subcontract to full turnkey

MXLT 02/2015 1528 January 2015

We h ay a R e g e l u n g S d n B h d• WEHAYA Group comprises of several entities, each focused in a specialised and individual core area of

expertise, ranging from mechanical, electrical and instrumentation installation to full system from diverse industries such as oil & gas, chemical & petrochemical, waste & water treatment, construction materials and other industries.

• Focused in a specialised and individual core area of expertise; ranging from mechanical, electrical and instrumentation installation to full system integration.

• Founded in 1990, Wehaya has emerged as a trusted and reliable partner to our customers. Our management team consists of qualified engineers with wide-ranging industry experience spanning 10 to 20 years

• Participated in more than 100 projects, both in Malaysia and as far afield as East Nigeria and China

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U Z M A B E R H A D• Uzma was incorporated in 2000 with a vision to be a regional

leader in oil and gas upstream services. Deeply rooted in Malaysia with operational offices in Australia, Indonesia and Thailand

• Uzma has grown with proven track records, serving more than 50

clients worldwide, delivering custom-made solutions and exceptional values in every offering.

• As an agile geoscience, production and well service company, Uzma provides integrated solutions to the upstream sector across exploration, development and production operations. Uzma assists its clients to find, connect and produce their hydrocarbon assets at the most efficient practicable conditions.

• Uzma’s core competencies are Geoscience & Petroleum Engineering, Manpower Consultancy, Integrated Enhanced Oil Recovery, Reservoir Description & Laboratory, Production Operations and Optimisation, Integrated Well Services, Oilfield Chemicals and Management System Consultancy.

1.Sabah has Oil & Gas Production Span

2.Sufficient Onshore Projects for SME Entry

3.Potential for SMEs to develop competency & capability to go Offshore

4.Smart Partnerships to leap frog organic growth

CONCLUSIONS

MXLT 02/2015 1828 January 2015

GRAND BALLROOM, THE MAGELLAN SUTERA HARBOUR RESORT

KOTA KINABALU SABAH13th & 14th April 2015

Day 2 Paper III: “Sabah Oil and Gas; A Sustainable Future for Sabah SMEs”, Dato’ Udani Bin Dato’ Seri Mohamed Daud, Group Executive Chairman, MaxEnergy Group

OPPORTUNITIES AND GROWTH IN THE OIL AND GAS INDUSTRY IN SABAH