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Sofiyan Yahya, SEAMOG CEO


  1. You have held and currently hold many important roles in oil & gas organisations, being a founding member and former president of MOGSC, current VP of MOGEC, and CEO of SEAMOG Group Sdn Bhd, to name a few. Over the years, what has been your greatest achievement(s)?
    From the point of view of various associations such as MOGSC and MOGEC, I think my greatest achievement through these organisations is that I have contributed towards the creation of a platform for industry and stakeholders to discuss and collaborate in a sustainable way on issues related to the industry. In the past, it was very much driven in one direction but since the organisations were formed, there is a platform where all relevant parties can engage collaboratively. To me this is a significant development for the local industry, to be able to have their voices heard, and play a role in shaping the future of the industry. Furthermore, through these organizations, we have been able to create a sort of community for the industry.  A community where stakeholders, government and the industry players themselves, can gather through various working platforms, meetings, forums, conferences, and even social events such as dinners and sport events. We’re not just all work, we also play together.

    As CEO of SEAMOG Group, a 100% Malaysian, very much a home-grown company – I think it’s an achievement for a local player to be able to offer the range of services we have. We have done this based on our determination and commitment to offer our experience, technical capabilities and resources, which we can also export. We are also happy that we have been able to contribute to the nation as our presence means another local player has emerged from the industry.

  2. Are there challenges you faced that became a crucial learning point for you? How did you overcome them?
    There are challenges but there was no one specific challenge that was so outstanding. I always keep an open mind. The key thing is, as long as you’re determined and resourceful, and apply yourself with initiative, every challenge is surmountable. That’s the only way you can progress.  

  3. Did you always know what you wanted to do in your career? What did you do to prepare yourself before starting your first job? I understand that your first job was in Petronas as an engineer.
    I have always been a determined person, so I always knew what I wanted to be. There wasn’t a time when I didn’t know what I wanted. If you know what you want from the beginning, then the issue isn’t so much about Where to start. If that is an issue for you, then you’ll have a slower start, because you need to get over that question first. But if you believe in yourself, and know what you want to achieve, then these are only minor issues because you are already on your way to going for your goals and working towards achieving them.

  4. What do you think about the current workforce coming into industry? What skills do you think are most relevant or most in demand today?
    The range of skills needed have always been the same, the oil and gas industry still requires the same range of capabilities from welders, riggers, technicians, engineers to specialist experts. The skill disciplines required to run and operate the oil and gas industry are the same. The only thing is because of the downturn, the industry is more focused on downstream, so perhaps we need more people for these downstream activities. But then again, when we talk about the capabilities needed for offshore and onshore – if you’re an expert in pumps offshore, you can also use this expertise in the petrochemical plants onshore. The same goes if you’re a welder, you can work offshore and you can also work onshore.

    The other issue is growing new talents and expand the talent pool. For example, now there is a lot of focus in Sabah and Sarawak areas, as well as in Johor for Pengerang project. There is a huge opportunity for growing local talents to serve the industry there. And when we want to go overseas, we also require more talents to follow the businesses and perform projects won overseas.

  5. What do you think about this statement, “It’s not what you know, it’s who you know.” Do you agree with that? Has your professional network been helpful in your career progression?
    I think for oil and gas industry, that’s not accurate. In general, oil and gas requires a higher standard of specifications, behaviour and discipline. So, no matter who you know, if you cannot perform at that higher level of standards and expectations, then you will eventually fail as a business. The ‘who you know’ is not sustainable in the oil and gas industry and is very short term, if that is your planned route to success. What is more important in this industry is what do you know, what are you capable of and what is your deliverable?

  6. Recent news have reported that the market condition for the oil & gas industry is slowly recovering. At the moment, the oil prices seem to hover between $50 - $60 per barrel. Do you think the price will go any higher?
    I think in the short term or in the near future, it’s not going to go above $60. I do believe $50 - $60 is what the range will be.

  7. What do you think is the future for oil & gas, especially with the emergence of Renewable energy?
    Renewable energy has been around for a while. The way I see it, it is an alternative. We still have coal for our power stations, and also hydroelectric power, so to me it is about co-existing alternatives. The world needs to look at the most efficient energy source and energy usage. I believe that renewable energy will co-exist with oil and gas, and that oil and gas will still be around for sometime because it has its niche where it is actually the most cost efficient use and application of energy. Of course if a time comes when renewable energy is much more efficient than anything else, then we should all move towards that – that’s a different scenario. For the moment, I believe that like with everything we have in this world today, we have alternatives. And having alternatives is always a good thing for the world.

  8. Do you foresee further consolidation in the supply side happening in the Malaysian oil industry in the near future?
    In the short term, the consolidation will happen because of the current situation. If we’re talking about the Malaysian scenario then of course it is dependent on how big is the Malaysian market. Now that it’s shrunk in certain areas, they will have to consolidate, otherwise they cannot survive. This will definitely have to happen in the near future and it is going to shape the industry. After that, we can’t say what will happen next. The crystal ball is very hard to see with clarity at the moment.

  9. What will be the critical success factors or qualities needed of entrepreneurs in the local oil and gas sector to sustain and even strive in the current competitive climate?
    Commitment to the business is important. A real entrepreneur who wants to go into a certain industry sector has to be really committed. By having this commitment and determination, you will find the solutions to be successful. It’s not so much about competitiveness – this is not the first time the industry climate has become very competitive. In fact, this is probably the third time in the span of 10-20 years that we are seeing this sort of business environment. During this time, businesses must persevere. When the going gets tough, the tough gets going. And it’s not just oil and gas, other industries go through downturns as well. So, if an entrepreneur wants to go into the local oil and gas industry, they must have that commitment and determination to see through their business plan and their services or products offerings. If you do not have that determination, I do not think you will succeed. Again, this applies to any business in any industry sector.

  10. Besides depending on PETRONAS for contracts, do you see more local players preparing to venture overseas for more work (eg. what SapuraEnergy has done to-date)? As Malaysia has a low-cost base and experienced workforce.
    The industry does not depend solely on PETRONAS for contracts. Yes, Malaysia does have relatively low-cost base, and we also have an experienced workforce. I think it’s very important to encourage Malaysians to work overseas. For regions such as the Middle East, despite their already diverse workforce, they welcome Malaysians for our experience, capability and professionalism. Perhaps because of our focus here in Malaysia has been maximising Malaysian content, Malaysians tend to focus on Malaysian work rather than go overseas. In this downturn however, more Malaysians have found work overseas. We spoke about consolidation earlier, and with more businesses offering wider range of services and capabilities, Malaysian players are becoming more attractive and relevant overseas.

  11. Do you have a motto or philosophy that you follow in life?
    Set your goals and be determined. Determination is the key ingredient in what I do. Never give up and be determined to see things through.

  12. And finally, what do you do to unwind after a stressful day at work? 
    I love getting into nature and photography. I guess they are activities that are completely opposite from what I do in my day-to-day business, hence the opportunity to unwind.

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Your Weekly Update: 12 - 16 August 2019

Market Watch 

Headline crude prices for the week beginning 12 August 2019 – Brent: US$58/b; WTI: US$54/b

  • Saudi Arabia’s overtures to further stabilise prices was met with a largely positive response by the market, allowing crude prices to claw back some ground after being hammered by demand concerns
  • Saudi officials reportedly called other members in the OPEC and OPEC+ producer clubs to discuss options on how to stem the recent rout in prices, with an anonymous official quoted as saying that it ‘would not tolerate continued price weakness’
  • Reports suggest that Saudi Arabia plans to keep its oil exports at below 7 mmb/d in September according to sales allocations, which was seen as a stabilising factor in crude price trends
  • This came after crude prices fell as the US-China trade war entered a new front, causing weakness in the Chinese Yuan, although President Trump has floated the idea of delaying the new round of tariffs beyond the current implementation timeline of September 1
  • Crude had also fallen in response to a slide in American crude oil stockpiles and a receding level of tensions in the Persian Gulf
  • In a new report, the International Energy Agency said that the outlook for global oil demand is ‘fragile’ on signs of an economic slowdown; there is also concern that China will target US crude if the US moves ahead with its tariff plan
  • The US active rig count lost another 8 rigs – 6 oil and 2 gas – the sixth consecutive weekly loss that brought the total number of active rigs to 934
  • Demand fears will continue to haunt the market, which will not be offset so easily of Saudi-led efforts to limit production; as a result, crude prices will trade rangebound with a negative slant in the US$56-58/b range for Brent and US$52-54/b for WTI


Headlines of the week

Upstream

  • Nearly all Anadarko shareholders have approved the Occidental Petroleum deal, completing the controversial takeover bid despite investor Carl Icahn’s attempts to derail the purchase
  • Crude oil inventories in Western Canada have fallen by 2.75 million barrels m-o-m to its lowest level since November 2017, as the production limits in Alberta appear to be doing their job in limiting a supply glut while output curbs are slowly being loosened on the arrival of more rail and pipeline capacity
  • Mid-sized Colorado players PDC Energy and SRC Energy – both active in the Denver-Julesburg Basin – are reportedly in discussion to merge their operations
  • Pemex has been granted approval by the National Hydrocarbon Commission to invest US$10 billion over 25 years to develop onshore and offshore exploration opportunities in Mexico
  • Qatar Investment Authority has acquired a ‘significant stake’ in major Permian player Oryx Midstream Services from Stonepeak Infrastructure Partners for some US$550 million, as foreign investment in the basin increases
  • PDVSA and CNPC’s Venezuelan joint venture Sinovensa has announced plans to expand blending capacity – lightening up extra-heavy Orinoco crude to medium-grade Merey – from a current 110,000 b/d to 165,000 b/d
  • BHP has approved an additional US$283 million in funding for the Ruby oil and gas project in Trinidad and Tobago, with first production expected in 2021
  • CNPC, ONGC Videsh and Petronas have reportedly walked away from their onshore acreage in Sudan, blaming unpaid oil dues on production from onshore Blocks 2A and 4 that have already reached more than US$500 million

Midstream/Downstream

  • Expected completion of Nigeria’s huge planned 650 kb/d Dangote refinery has been delayed to the end of 2020, with issues importing steel and equipment cited
  • Saudi Aramco’s US refining arm Motiva announced plans to shut several key units at its 607 kb/d Port Arthur facility in Texas for a 2-month planned maintenance, affecting its 325 kb/d CDU and the naphtha processing plant
  • ADNOC has purchased a 10% stake in global terminal operator VTTI, expanding its terminalling capacity in Asia, Africa and Europe
  • A little-known Chinese contractor Wison Engineering Services has reportedly agreed to refurbish Venezuela’s main refineries in a barter deal for oil produced, in a bid for Venezuela to evade the current US sanctions on its crude exports
  • Swiss downstream player Varo Energy will increase its stake in the 229 kb/d Bayernoil complex in Germany to 55% after purchasing BP’s 10% stake
  • India has raised the projected cost estimate of its giant planned refinery in Maharashtra – a joint venture between Indian state oil firms with Saudi Aramco and ADNOC – to US$60 billion, after farmer protests forced a relocation

Natural Gas/LNG

  • The government of Australia’s New South Wales has given its backing to South Korea’s Epik and its plan to build a new LNG import terminal in Newcastle
  • Kosmos Energy is proposing to build two new LNG facilities to tap into deepwater gas resources offshore Mauritania and Senegal under development
  • In the middle of the Pacific, the French territory of New Caledonia has started work on its Centrale Pays Project, a floating LNG terminal with an accompanying 200-megawatt power plant, with Nouvelle-Caledonia Energie seeking a 15-year LNG sales contract for roughly 200,000 tons per year
August, 16 2019
The State of the Industry: Q2 2019

The momentum for crude prices abated in the second quarter of 2019, providing less cushion for the financial results of the world’s oil companies. But while still profitable, the less-than-ideal crude prices led to mixed results across the boards – exposing gaps and pressure points for individual firms masked by stronger prices in Q119.

In a preview of general performance in the industry, Total – traditionally the first of the supermajors to release its earnings – announced results that fell short of expectations. Net profits for the French firm fell to US$2.89 billion from US$3.55 billion, below analyst predictions. This was despite a 9% increase in oil and gas production – in particularly increases in LNG sales – and a softer 2.5% drop in revenue. Total also announced that it would be selling off US$5 billion in assets through 2020 to keep a lid on debt after agreeing to purchase Anadarko Petroleum’s African assets for US$8.8 billion through Occidental.

As with Total, weaker crude prices were the common factor in Q219 results in the industry, though the exact extent differed. Russia’s Gazprom posted higher revenue and higher net profits, while Norway’s Equinor reported falls in both revenue and net profits – leading it to slash investment plans for the year. American producer ConocoPhillips’ quarterly profits and revenue were flat year-on-year, while Italy’s Eni – which has seen major success in Africa – reported flat revenue but lower profits.

 After several quarters of disappointing analysts, ExxonMobil managed to beat expectations in Q219 – recording better-than-expected net profits of US$3.1 billion. In comparison, Shell – which has outperformed ExxonMobil over the past few reporting periods – disappointed the market with net profits halving to US$3 billion from US$6 billion in Q218. The weak performance was attributed (once again) to lower crude prices, as well as lower refining margins. BP, however, managed to beat expectations with net profits of US$2.8 billion, on par with its performance in Q218. But the supermajor king of the quarter was Chevron, with net profits of US$4.3 billion from gains in Permian production, as well as the termination fee from Anadarko after the latter walked away from a buyout deal in favour of Occidental.

And then, there was a surprise. In a rare move, Saudi Aramco – long reputed to be the world’s largest and most profitable energy firm – published its earnings report for 1H19, which is its first ever. The results confirmed what the industry had long accepted as fact: net profit was US$46.9 billion. If split evenly, Aramco’s net profits would be more than the five supermajors combined in Q219. Interestingly, Aramco also divulged that it had paid out US$46.4 billion in dividends, or 99% of its net profit. US$20 billion of that dividend was paid to its principle shareholder – the government of Saudi Arabia – up from US$6 billion in 1H18, which makes for interesting reading to potential investors as Aramco makes a second push for an IPO. With Saudi Aramco CFO Khalid al-Dabbagh announcing that the company was ‘ready for the IPO’ during its first ever earnings call, this reporting paves the way to the behemoth opening up its shares to the public. But all the deep reservoirs in the world did not shield Aramco from market forces. As it led the way in adhering to the OPEC+ club’s current supply restrictions, weaker crude prices saw net profit fall by 11.5% from US$53 billion a year earlier.

So, it’s been a mixed bunch of results this quarter – which perhaps showcases the differences in operational strategies of the world’s oil and gas companies. There is no danger of financials heading into the red any time soon, but without a rising tide of crude prices, Q219 simply shows that though the challenges facing the industry are the same, their approaches to the solutions still differ.

Supermajor Financials: Q2 2019

  • ExxonMobil – Revenue (US$69.1 billion, down 6% y-o-y), Net profit (US$3.1 billion, down 22.5% y-o-y)
  • Shell - Revenue (US$90.5 billion, down 6.5% y-o-y), Net profit (US$3 billion, down 50% y-o-y)
  • Chevron – Revenue (US$36.3 billion, down 10.4% y-o-y), Net profit (US$4.3 billion, up 26% y-o-y)
  • BP - Revenue (US$73.7 billion, down 4.11% y-o-y), Net profit (US$2.8 billion, flat y-o-y)
  • Total - Revenue (US$51.2 billion, down 2.5% y-o-y), Net profit (US$2.89 billion, down 18.6% y-o-y)
August, 14 2019
TODAY IN ENERGY: Australia is on track to become world’s largest LNG exporter

LNG exports from selected countries

Source: U.S. Energy Information Administration, CEDIGAZ, Global Trade Tracker

Australia is on track to surpass Qatar as the world’s largest liquefied natural gas (LNG) exporter, according to Australia’s Department of Industry, Innovation, and Science (DIIS). Australia already surpasses Qatar in LNG export capacity and exported more LNG than Qatar in November 2018 and April 2019. Within the next year, as Australia’s newly commissioned projects ramp up and operate at full capacity, EIA expects Australia to consistently export more LNG than Qatar.

Australia’s LNG export capacity increased from 2.6 billion cubic feet per day (Bcf/d) in 2011 to more than 11.4 Bcf/d in 2019. Australia’s DIIS forecasts that Australian LNG exports will grow to 10.8 Bcf/d by 2020–21 once the recently commissioned Wheatstone, Ichthys, and Prelude floating LNG (FLNG) projects ramp up to full production. Prelude FLNG, a barge located offshore in northwestern Australia, was the last of the eight new LNG export projects that came online in Australia in 2012 through 2018 as part of a major LNG capacity buildout.

Australia LNG export capacity

Source: U.S. Energy Information Administration, based on International Group of Liquefied Natural Gas Importers (GIIGNL), trade press
Note: Project’s online date reflects shipment of the first LNG cargo. North West Shelf Trains 1–2 have been in operation since 1989, Train 3 since 1992, Train 4 since 2004, and Train 5 since 2008.

Starting in 2012, five LNG export projects were developed in northwestern Australia: onshore projects Pluto, Gorgon, Wheatstone, and Ichthys, and the offshore Prelude FLNG. The total LNG export capacity in northwestern Australia is now 8.1 Bcf/d. In eastern Australia, three LNG export projects were completed in 2015 and 2016 on Curtis Island in Queensland—Queensland Curtis, Gladstone, and Australia Pacific—with a combined nameplate capacity of 3.4 Bcf/d. All three projects in eastern Australia use natural gas from coalbed methane as a feedstock to produce LNG.

Australia LNG projects

Source: U.S. Energy Information Administration

Most of Australia’s LNG is exported under long-term contracts to three countries: Japan, China, and South Korea. An increasing share of Australia’s LNG exports in recent years has been sent to China to serve its growing natural gas demand. The remaining volumes were almost entirely exported to other countries in Asia, with occasional small volumes exported to destinations outside of Asia.

Australia LNG exports by destination country

Source: U.S. Energy Information Administration, based on International Group of Liquefied Natural Gas Importers (GIIGNL)

For several years, Australia’s natural gas markets in eastern states have been experiencing natural gas shortages and increasing prices because coal-bed methane production at some LNG export facilities in Queensland has not been meeting LNG export commitments. During these shortfalls, project developers have been supplementing their own production with natural gas purchased from the domestic market. The Australian government implemented several initiatives to address domestic natural gas production shortages in eastern states.

Several private companies proposed to develop LNG import terminals in southeastern Australia. Of the five proposed LNG import projects, Port Kembla LNG (proposed import capacity of 0.3 Bcf/d) is in the most advanced stage, having secured the necessary siting permits and an offtake contract with Australian customers. If built, the Port Kembla project will use the floating storage and regasification unit (FSRU) Höegh Galleon starting in January 2021.

August, 14 2019