Going where the oil flows

DEMAND for offshore fuel is tipped to grow, and this will likely lead to a corresponding increase in exploration activities. For Singapore-based MTQ Corporation, this presents a great growth opportunity - particularly in the Middle East where it is looking to expand its footprint.

Oilfield engineering - one of MTQ's three divisions - is the group's core business segment, and the company is banking on a bright outlook for the offshore drilling industry, Kuah Boon Wee, CEO of MTQ, told BT in an interview.

"Offshore fuel is a source of energy that continues to remain important. Underpinning all the economic growth is the need for more energy and (offshore) fuel, and - particularly in the Asian context - it is a big part where coal and nuclear (energy sources) have their challenges," he said.

Mr Kuah pointed out that besides the need for more energy, there is also demand for offshore fuel to replace depleted resources.

Moreover, the present high price of oil is itself an attractive enough proposition for the pursuit of commercial exploration of offshore fuel, he added. This, he said, has contributed to the healthy construction and deployment of offshore rigs. "So, there is demand driven by need and demand driven by depletion, (while) on the supply side there are quite a lot of assets being built. Thus, all those are background factors for a healthy industry outlook."

The former senior management executive at PSA International, who has also previously served as CEO of PSA Singapore Terminals, has deep experience in identifying key global industry trends. It is therefore no surprise that MTQ has already pinpointed its next location of growth and even taken decisive steps to establish its presence there.

"The Middle East represents the next hub for us. The market outlook and environment there means there are a lot more rigs being deployed there, and a few companies have actually globally relocated there," Mr Kuah said.

In fact, the company began to make inroads into the Middle East region as far back as in 2009 when it set up a fully owned venture in Bahrain, at a reported cost of US$20 million, to serve the Middle East oil drilling market. MTQ's 40,000 square metre facility in the Bahrain International Investment Park provides engineering, repair and refurbishment services for oilfield equipment used in oil drilling operations.

Moving to Bahrain was a logical move for MTQ, Mr Kuah explained, as being in Singapore limited the scope of its participation in the Middle East drilling market, because it would take a considerable time to transport oilfield equipment between the Middle East and Singapore.

"Historically, being a Singapore-based company, we can serve a lot of offshore locations from here, including Australia, India and all of South-east Asia. But we can't really service the Middle East market from here, and also it (the Middle East) is a very sizable market so it was a very logical thing for us to do (to set up there)."

He noted that establishing its presence in Bahrain and the Middle East has proven to be a very exciting prospect for MTQ as it has also provided the company with traction in terms of local knowledge of the workforce and the ground there.

As it stands, Mr Kuah revealed, the Bahrain facility will play a strategic role in the company's overall Middle East expansion plan as it will be the base for MTQ to service the rest of the region.

"We have sizable space in our current facilities (in Bahrain) for incremental expansion. In terms of land and labour, we can always look to deploy more. So our current location will be the base for us to expand out (into the region)," he stated.

Mr Kuah is strongly optimistic about the prospects that the Middle East offers. He acknowledged that even though the Middle East region "tends to be in the news for a lot of the wrong reasons", as a market it will continue to be an important player in global energy.

Not even the emergence of shale as a viable source of alternative energy would affect the demand for offshore oil drilling or the consequent position of the Middle East as a provider of such offshore fuel, he emphasised.

He conceded that the emergence of shale would knock down the price of energy, particularly in the US, as it is another source of fossil fuel. Mr Kuah, however, pointed out that the demand for energy cannot be underestimated and so he does not believe that there will be a resultant downward pressure on the price of oil & gas globally.

"Everyone talks about shale but it is going to take a long time for the US to become a net exporter, as lots of things have to happen first; and even in that scenario, I can foresee that the Middle East will continue to be a very important source of fossil fuel to the energy needs of the whole world."

msingh@sph.com.sg