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TheStarOnline (Biz): Shell pumped up about Malaysia

Monday May 1, 2006

Shell pumped up about Malaysia

By ELAINE ANG

OIL giant Royal Dutch Shell plc's “love affair” with Malaysia is still going strong despite having spanned 115 years, when Shell Malaysia began operations in 1891. 

Shell Malaysia's newly appointed chairman Saw Choo Boon could not be happier and hopes it will last another 100 years – at least. From the look of things, there is a high possibility his wish would come through.  

Saw said the group saw excellent prospects in the local oil and gas (O&G) industry and would continue to pump substantial investments into the country to fuel business growth. 

Saw Choon Boon

“Malaysia is an important portfolio for Royal Dutch Shell – prospects are good with a lot of O&G activities, so investment in Malaysia should still be quite substantial despite the competing need for limited capital globally. 

“We have done well in Malaysia and are one of the top 10 in terms of size and profitability among the group's operating companies in over 140 countries,” he told StarBiz in an interview in Kuala Lumpur. 

Saw expects quite significant O&G activities coming on-stream in future. 

One would be the development of Shell's deepwater finds in Sabah. The other involves development activities in Sarawak.  

“The need for gas is high, resulting in significant growth in the liquefied natural gas (LNG) business. We have big plans for the development of facilities with our partners and Petronas, so that we can bring on line the gas required. That expenditure would be quite substantial,” Saw said. 

Shell has invested over RM70bil in Malaysia in the last four decades. It has a current investment commitment of over RM12bil from 2004 to 2008. 

Looking at the activities ahead, Saw foresees investment to be along the same level post 2008. “In business we must grow to survive. We need to maintain and grow our business in line with the growth of the country and we believe this country will continue to grow. That will be our challenge,” Saw said. 

Shell would be focusing on three major sectors to enhance business growth. The main area would be its upstream activities. 

“We are aggressively looking into exploration and production (E&P) in the O&G business. Our E&P activities are mainly in Sabah, Sarawak and off the coast of Terengganu.  

“We strive to be efficient in production and hope to add on to group reserves,” Saw said. 

He said Shell's joint-venture company with Petronas Carigali Sdn Bhd – CS Mutiara Petroleum Sdn Bhd – has made six O&G discoveries offshore Trengganu, which it hoped to commercialise within the next few years. 

Shell Malaysia believes that fossil energy will remain a major source of energy for quite a long time.

“Oil production is set to grow in the next five-year plan,” he added. 

Shell's next area of focus would be to ensure the profitability of its gas and power business. 

“We are partners with Petronas' MNLG 2 and MNLG 3 companies in the LNG business, which have been very successful and we look forward to their continued growth. They are doing well due to the increasing need for LNG,” Saw said. 

Shell also manages the Shell Middle Distillate Synthesis Plant, which is a gas-to-liquids plant in Bintulu producing ultra clean fuels and very specialised clean products, including high quality diesel, candles, detergents and wax for the global market. 

“The plant, which is the first commercial gas-to-liquids plant in the world, made a profit two years ago. Petronas, Mitsubishi Corp and the Sarawak government are our partners. 

“We want to continue to grow this company by optimising product marketing, finding more high-end use for the products, increasing the efficiency of the plant and reducing operational costs,” Saw said, adding that about 75% of the products were exported. 

Shell's downstream activities continue to flourish. The company is currently the market leader in the retail petroleum business, with a 36% market share. 

“We want to maintain this leadership position by continually improving our product and service quality and offerings. We are targeting our retail petroleum business to grow about 6% this year, in line with the country's gross domestic product growth,” Saw said. 

He said Shell was investing RM440mil in the retail business in 2005 and 2006 to build and open 30 new petrol stations nationwide, with 20 new sites to be opened by year-end. 

The investment includes the introduction of new information technology systems to cater for the “pay at the pump” facility for credit card and Shell fleet cardholders. 

“Retail site selection is a rigorous exercise and we are actively looking at opening new sites in Penang, Klang Valley and Johor Baru.  

“Each site is expected to cost RM8mil to RM12mil. Our network size will increase to 850 stations by year-end,” Saw said. 

He said Shell aimed to increase the uptime of its refinery in Port Dickson as well as process different kinds of crude to optimise refinery margins.  

Saw noted that in general, regional refining capacity had been pretty tight over the last two years, causing refining margins to rise.  

This was mainly caused by significantly increased demand for oil products and reduced investment in refineries due to poor refining margins and very stringent environmental standards in certain countries.  

“Whatever the margin situation is, we will focus our energies to ensure that we are able to operate the refinery as efficiently as possible – reduce operating costs, increase flexibility and optimise feedstock,” Saw said. 

At the top of Saw's list as Shell's new chairman is for the company to remain profitable. “We also want to maintain and grow our reputation in this country by being a responsible corporate citizen – to be environmentally friendly and operate safely and efficiently.  

“We want to be part of Malaysia's growth and contribute to nation-building, particularly in the Ninth Malaysia Plan,” Saw said. 

SHELL :  [Stock Watch]  [News]

Shell set to gain from 9MP

Shell Malaysia's new chairman Saw Choo Boon talks to StarBiz journalist Elaine Ang about the company's prospects and his plans to further develop the company. 

STARBIZ: What are the prospects for Shell Malaysia and the oil and gas (O&G) industry, based on the current business environment?  

Saw Choo Boon: A total of RM43.8bil is expected to be invested in the O&G industry under the energy/development sector in the Ninth Malaysia Plan (9MP).  

Of this, RM13.1bil (30%) will be to expand O&G exploration as well as development and production activities to enhance the long term supply of O&G.  

The balance will be utilised to upgrade O&G supply infrastructures, increase the number of service stations and expand the petrochemical industry.  

Saw Choo Boon

This is certainly in line with Shell’s own business plan, which is centred on Sabah deepwater exploration, development activities in Sarawak and the recent gas discoveries offshore Peninsula Malaysia. 

Our downstream business, particularly in commercial lubricants, fuels and bitumen, will see significant benefits from the RM220bil allocated under the 9MP to grow the infrastructure development, agriculture and manufacturing sectors.  

StarBiz: How does Shell continue to be a leader in the oil and gas business?  

Saw: Our push is technology. In the O&G business, we believe we have the technical lead in many areas.  

In the downstream business, we have come up with many differentiated products, for example, the V-Power.  

We were the first to commercialise a gas-to-liquid plant in Bintulu. We are now looking at building 10 times the size of the Bintulu plant in other countries.  

In upstream, we believe we are the leader in deepwater and seismic technology. We also have the technology to turn waste (cellulose waste and biomass) into renewable energy. 

Shell Malaysia believes that fossil energy will remain a major source of energy for quite a long time.

StarBiz: What are your plans to grow the group's global and regional hubs in the country? 

Saw: Malaysia is one of the main centres for the consolidation of services for the group. My intention is to grow these service hubs and bring in as many more into Malaysia.  

Among our seven specialised service hubs, the international technology and consultancy service company Shell Global Solutions (SGS) is pursuing a “Grow East” strategy to seize the emerging opportunities in the Asian region, including Malaysia, by strengthening the expertise in our Kuala Lumpur office.  

The KL office is a springboard for SGS's plans in the Asia-Pacific.  

We will almost triple the number of local staff at the KL office by 2008, compared with 2004.  

By 2008, almost half of the 500-strong professional and technical workforce will be local and the majority of the balance will be from Asia.  

We have an upstream technical centre in Miri and will be setting up a deepwater centre to service the region. 

StarBiz: What are your comments on the current high oil price? 

Saw: I believe oil price has reached a higher level but it has to settle at a lower and more sustainable level, which I am unable to predict or speculate.  

We believe fossil energy will remain a major source of energy for quite a long time. 

However, alternative energy will play a very significant role in the future and that is why we are investing substantially in every aspect of alternative energy – hydrogen, solar, wind, biofuel. 

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