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Oil & Gas in Malaysia - 2018 in review

Posted by: Wei Hua Ng
09/11/18

A recovering industry, what can we expect to be different?

What a difficult and challenging year it has been for everyone in the O&G industry! Globally, oil prices are recovering due to corrections from supply and demand. With sanctions on Iran looming, and possible increase in production from Russia and Saudi Arabia to balance production, price fluctuations are expected to be minimal and the outlook for 2019 appears positive. Or, is it?

In South East Asia (SEA) region, and in particular for oil and gas activities in Malaysia, Petroliam Nasional Bhd (Petronas) is expected to award more drilling contracts this year. The impetus is to boost production following a lapse in investment during the 2015 oil price collapse. 

Despite the flurry of activities within the Oil and Gas community, hiring activities are not yet on par with the perceived oil price recovery. Some organisations are still shedding staff via continuous reorganization whilst others are looking to form stronger partnerships via merger and acquisitions. Merger and acquisitions usually results in more positions being released when the organisation streamlines their roles and responsibilities. From a job market perspective, all these bring negative connotations, in particular to professionals seeking to re-enter the market following a long hiatus.

Despite the uncertainties as outlined above, there are players who are keen to set-up their presence in Malaysia. Some of these companies have assets globally but desire to tap on the local Malaysian workforce and established infrastructure such as talent pool, engineering resources and manufacturing capacities as an entry into the scene. Such strategies are prudent, considering Malaysia has historically been the Oil & Gas hub for the SEA region. Lower operating costs are also another convincing reason to set-up a base here. Overseas companies are actively tapping into the local talent pool. Such endeavors help with boosting the local job market, but vacancies are limited in contrast to available candidates.

Funding for new projects still remain optimistically slow. Most of these are related to infill drilling and water flooding, which basically increases back production and speeds up recovery on the reservoir. There has been a lack of investment made for new developments, colloquially termed Greenfield, with the exception of Pegaga for Mubadala. As a result, contract flows to Service Providers have been slow and indirectly impacted hiring in the market.

In general, market outlook from most players in Malaysia appears to be conservative with regards to hiring. The recent oil crash in 2015 has taken a longer period for many operators to recover and bounce back. Coupled with persistent push from the renewable energy sector and the uncertainties stemming from shale oil revolution, most companies which were affected in the past, are cautious in expending their resources. In the past, hiring is most intense every Q4 of the year. This is to account for new developments coming on stream the following year. At present, while such trends are still holding out, hiring has been for very niche positions, particularly only to the offshore drilling front as Petronas seeks to boost their production to arrest gradual decline stemming from No Further Activity (NFA).

How prepared are you as an employee in the face of such changes?

Re-calibrate your salary expectations! Traditionally, the Oil and Gas sector attracts the best talent pool due to better remuneration and fringe benefits in contrast to other sectors. Many who were laid off during the recent oil crash are expecting similar benefits when they are re-joining the workforce. Not many are keen to take mediocre remunerations uplift unless the situation warrants it. Those that survived the oil crash and remained employed usually struggle with long work hours due to reduced work force and double work load. As such, job seekers, being aware of these conditions, generally do not want to enter the work force unless they are remunerated well. On the other hand, these expectations are not emphatically shared by the employers. Some, due to factors mentioned above while others are just taking advantage of the current market conditions. Unless significant positive changes occurs to the industry in the following years, the job market remains bearish despite oil price recovering to 80% of its USD 100/barrel benchmark. In general, market expectations were reset following the recent oil crash and employees have to be cognizant of them.

Whilst keeping staff numbers low helps to keep cost down, another measure being mooted and deliberated is 4.5 working days. Some operators like Murphy implemented this work culture to their advantage. It is proven that a shorter work cycle helps with increased productivity while keeping staff motivated via a work life balance mantra.

As we approach the end of 2018 and look towards 2019, the market is slowly showing signs of recovery. Hiring is still at a sub-modest rate, but significantly better in contrast to other years. Despite the slow improvements in the market, I personally look forward to 2019. I eagerly anticipate improvements to the hiring market, and positioning myself and my candidates in an ever evolving market which requires more innovation, skills and selection.

I am keen to know what my connections’ thoughts are on these issues and highlights raised in this article. What do you think 2019 will bring for the Malaysian oil and gas industry? With the recently concluded Malaysian Budget that will require stronger economic participation from PETRONAS, how will this affect the job market?

WRS is a specialist staffing solutions and global mobilisations company. Operating in the energy, maritime, mining, Construction and commodities and trading industries

 

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