OGSE firms must embrace low-carbon future to stay competitive: Petronas

Kuala Lumpur

THE oil and gas services and equipment (OGSE) companies in Malaysia must embrace the current market uncertainties and move towards a low-carbon future to stay competitive, a Petronas senior executive said on Thursday.

Speaking at an online event on Thursday, Hazli Sham Kassim, the chief of government and regulator advisory of the state-owned energy firm, said the country's oil and gas industry is currently facing one of its toughest periods in history.

The Covid-19 pandemic has accelerated the pace of energy transition, compounding the challenges already caused by the virus outbreak and a supply glut that has slashed energy prices and eroded profit margins, Mr Hazli said at the National OGSE Sustainability Forum.

The event was co-organised by the Economic Planning Unit of the Prime Minister's Department and the Malaysia Petroleum Resources Corporation.

There is mounting pressure to balance investor and consumer's rising focus on the environmental, social and governance (ESG) aspect and policymaker's requirements for affordable and reliable energy supplies, said Mr Hazli.

"The cheapest fossil fuel to produce electricity in the world is coal, but that comes with a certain environmental cost," he said.

"We, as a country, must balance that energy mix. Malaysia will launch the National Energy Policy in the second half of the year. Hopefully, that will guide our country in addressing this energy transition."

Petronas has already announced plans to achieve net-zero carbon emissions by 2050, which will see the national oil and gas company reducing its operational carbon footprint while investing more in renewable energy.

The OGSE sector must adapt along with the energy transition to stay agile, through industry collaboration, technology and talent development, exploring new markets and boosting export competency, Mr Hazli said.

There are around 2,800 active OGSE companies in Malaysia, and almost all of them consist of small and medium-sized enterprises that are mainly suppliers to Petronas.

Within the OGSE industry, only 32 companies have adopted sustainability reporting, said Mustapa Mohamed, Malaysia's Minister in the Prime Minister's Department (Economy) at the same forum.

Out of this, only one company, the Bursa Malaysia-listed Dialog Group, is included on the Dow Jones Sustainability Indices. The benchmark tracks the stock performance of leading companies in terms of economic, environmental and social criteria.

"This low adoption suggests that ESG awareness remains uneven among OGSE players even among public-listed companies, what more among SMEs," Mr Mustapa said.

As investors and governments step up their sustainability push, the minister said businesses have an important role to play as Malaysia seeks to transform and align the way of doing business to meet the requirements of its trading partners.

This, he added, would be in line with the Sustainable Development Goals and the Paris Agreement.

"Perhaps, looking into the uneven awareness on the sustainability issue, more needs to be done within this ecosystem to accelerate adoption across the industry," said Mr Mustapa.