Business Overview

10. INDUSTRY OVERVIEW 10. INDUSTRY OVERVIEW 10.1 Global Economy Global economic expansion is expected to remain finm at 4.3% while the growth in world trade is projected to expand at a stronger rate of 7.4% in 2006. A more balanced global growth is expected across the major economies, with the recovery in Japan and Europe. Another notable feature is the stronger investment uptrend seen in several major economies while consumption remains robust. Growth in the East Asian region is expected to be sustained at a strong pace of 7-7.2%. The growth is also supported by the recovery in the electronics sector following higher leT-related spending in the industrial economies and continued strength in domestic demand in the region. The laller will be driven by higher consumption of the significant young population that have high discretionary spending power and strong demand for consumer electronic products. While the global economy is expected to expand, there are still downside risks on the horizon; in particular, uncertainties still remain with respect to adjustments in the imbalance brought about by the sharp increases in oil prices. There were notable shocks to the world economy when oil prices rose sharply to almost USD70 per barrel on 30 August 2005. Given the likely pressure on general price levels, interest rate policy is likely to continue to tighten with rates expected to gradually continue with its upward trend, especially in the US. Rising oil prices also edged global inflation upwards, but still at a manageable level. (Source: BNM’s Annual Report 2005, BNM Press Release on BNM Annual Report 2005 (Ref No. 03/06/03) andMinistryofFinance Malaysia ‘s EconomicReport2005/2006)
10.2 Overview and Outlook of tbe Ecouomy of Malaysia Overview Malaysia has a diversified economy; the principal sectors of which arc services, manufacruring, agriculture, mining and construction. Malaysia produces and exports a wide range of manufactured goods, including electronic components and equipment, electrical machinery and appliances chemicals, plastics, textiles and apparels, wood products and rubber products, and also exports petroleum, liquefied natural gas, sawn timber, sawn logs and tin. During the past three (3) decades, through the implementation of strategic policies, Malaysia made significant progress towards the transfonnation of its economy from one characterised by agricultural production and mining to one characterised by manufacturing and services. Set out below the annual change on real GDP by sector (1987=I 00). Growth C%)  1997  1998  1999  2000  2001  2002  2003  2004  2005p  2006f  GDP Agriculture Manufacturing Mining and quanying Construction Services  7.7 0.7 10.1 1.9 10.6 9.9  -7.4 -3.3 -13.4 0.8 -23.0 -0.7  5.8 3.8 13.5 -3.1 -5.6 3.3  8.3 6.1 18.3 0.3 0.6 6.7  0.3 -0.6 -5.9 -1.5 2.1 6.0  4.t 2.6 4.1 4.0 2.3 6.4  5.3 5.7 8.3 5.9 1.9 4.4  7.1 5.0 9.8 3.9 -1.5 6.8  5.3 2.t 4.9 0.8 -1.6 6.5  6.0 2.0 7.0 5.0 1.0 6.0  Noles:  p  preliminary  f  forecast  Source: Infocredit D&B
10. 1l”DUSTRY OVERVIEW (Cont’d) Despite concerns over the impact of high oil prices and uncertainty in the external outlook in the early part of 2005, aggregate domestic demand recorded a strong growth rate of 7.3%. Private consumption continued to increase, supported by positive developments in the economy, namely, rising disposable incomes, the increase in job vacancies and the accommodative financing conditions. The higher fuel prices did not dampen private consumption activity as consumption levels were maintained with some moderation in savings, underscoring consumer confidence on income growth and positive outlook for the economy. In addition, the Government took active measures following the adjustment of administered prices to reinstate allowances to mitigate the increase in the cost of living and in reducing road taxes on smaller vehicles used by the lower-income group. As for private investment, concerns over the impact of high oil prices and the uncertain outlook for the economy was balanced by positive developments, particularly the uprum in the electronics cycle towards the end of 2005 as well as the sustained strength in domestic demand. As a net oil exporter, Malaysia benefits to a degree from the higher world oil prices as crude oil accounts for approximately 5% of total exports. Since the 2001 economic slowdown, most industrial countries, but notably the US, have pursued highly expansionary macroeconomic policies. As a result, world interest rates are close to historical lows and many countries have high fiscal deficits. Low interest rates have fuelled housing and asset price rises, at the same time supporting consumption and leading to a sharp deterioration in the current account in the US. As global GDP accelerated over the past year, inflationary pressure started to mount, albeit remaining very mild. Inflation increased in response to the high global oil prices, but remained at manageable levels. While retail petrol prices had increased, it did not have disruptive effects on the cost structures of companies. At the same time, producers had partly absorbed some of the price increases due to competitive pressures, and thus moderated the increase in domestic prices. The cost-push increase in prices was mainly seen in the transport and communications category while core inflation remained relatively subdued at 2% in 2005 (2004: 1%). Headline inflation, as measured by the annual change in the Consumer Price Index (“CPI”) stood at 3% for the year 2005. More importantly, higher energy prices also appeared to have intensified efforts towards greater energy efficiency and increased productivity in order to minimize costs. There was evidence of greater efficiency in terms of energy usage in the manufacturing sector, indicated by the downward trend in the energy intensity, as measured by energy consumption over sales. Labour market conditions remained stable with unemployment rate remaining low at 3.5% in 2005. Public and Private Consumption and Investment Domestic demand conditions remained favourable in 2005, registering a strong growth of 7.3% in 2005 (2004: 7.5%). Growth in aggregate domestic demand was supported mainly by the buoyant expansion in private sector activities. In spite of concerns on high oil prices and some uncertainty on the external outlook in the early part of the year, private consumption was sustained at a high level throughout 2005, growing by 9.2% in 2005 (2004: 10.5%). Consumer confidence remained buoyant as income continued to grow due to high export earnings and favourable employment conditions. The Malaysian Institute of Economic Research (“MIER”) Consumer Sentiment Index (“CSI”), which reflects consumers’ assessments of their personal finances and the economy, peaked at 120.9 in the first quarter of 2005. However, higher oil prices started to impact consumer sentiments, which softened in the second and third quarters of 2005. To a large extent, consumers were insulated from large increases in oil prices through the Government’s subsidy for fuel, though a portion of the subsidies was removed. The Government also announced a temporary halt on price increases on fuels and toll rates, and a reduction in road tax. In the second half-year of 2005, improvements in labour market conditions were also accompanied by higher commodity prices, especially prices of rubber, leading to rising disposable income of households in both urban and rural areas. This, together with the bonus payments to civil servants at the end of the year, boosted consumer confidence. The improved. sentiment was reflected by the increase in the CSJ in the fourth quarter of2005. 10. INDUSTRY OVERVIEW (Con/’il) Public investment turned around to register a marginal growth of 0.4% in 2005 (2004: -8.7%). The Federal Government continued to focus on developmental projects that improved economic and social services sectors of the country. Most importantly, these programmes were implemented based on the emphasis of achieving a greater balance between the development of urban and rural areas. In the economic sector, expenditures were mainly focused on modernising the agriculture sector, improving infrastructure in rural areas, enhancing industrial growth and improving transportation infrastructure. At the same time, capital expenditures for the social services sector were mainly allocated towards enhancing and upgrading of essential services, nanlely education, training and healtb and medical services as well as provision of atTordable houses to the people. Meanwhile, capital expenditures by the Non-Financial Public Enterprises (“NFPEs”) were stronger in 2005, largely attributed to capacity expansion etTorts and commitment to improve efficiency by the NFPEs, such as Petronas and Telekom Malaysia Berhad. Monetary and Fiscal Policies The conduct of monetary policy in 2005 focused on balancing the risks to economic growth and inflation over the medium term. Over the course of 2005, the risk of slower economic growth diminished, while the risks to inflation remained. Consequently, the Overnight Policy Rate (“aPR”) was then raised by 30 basis points to 3% on 30 November 2005 and by 25 basis points on 22 February 2006. At 3.25%, the aPR continues to remain below its neutral level. Monetary policy therefore continues to remain supportive of the economy. On 21 July 2005, BNM announced the change from a fixed exchange rate system to a managed float exchange rate regime. The ringgit’s value is now monitored against a basket of the currencies of Malaysia’s major trade partners. The continued strengthening of economic and financial conditions provided the conditions required to enable an efficient transition to the new arrangement. Following the floating of the ringgit, speculative portfolio positions tbat had been built-up in the first half of the year were unwound. Outlook oftbe Malaysian Economy in 2006 The Malaysian economy is expected to strengthen further in 2006 in an environment of more favourable global conditions. Real GDP is projected to grow at a faster rate of 6%, driven by strengthening export performance and resilient domestic demand. The global semiconductor up-cycle, sustained global growth and higher prices for primary commodities are expected to have positive effects on exports. as well as private consumption and investment. Current indicators suggest that the upturn in the global semiconductor industry, which began in the second balf of 2005, would gain momentum in 2006. Malaysia is expected to benefit from this favourable development with a stronger growth in manufactured exports, particularly in the computer and semiconductor segments. Domestic demand would be driven by private consumption as a result of rising income and demographic factors. The latter underscores the high propensity to consume of Malaysia’s relatively large young working population. At the same time, in an environment of ample liquidity, credit conditions are expected to remain supportive. Private investment is expected to expand particularly in the manufacturing sector and the oil and gas industry, spurred by the favourable demand conditions. On the supply side, growth in the manufacturing sector is expected to strengthen in line with the upturn in the global semiconductor cycle, while the services sector is expected to sustain its strong performance supported by higher trade-related activities, and continued increase in consumption and business activities. The commodities sector is expected to see a more broad­based growth, with improvement in the production of rubber, crude oil and the other agriculture segments, while crude palm oil output consolidates after three years of strong
performance. The construction sector is expected to register a positive growth in line with the improvement in the civil engineering segment. 10. INDUSTRY OVERVIEW (Cont’d) Cost-push inflation is expected to rise following the increase in the price of petroleum products on 28 February 2006. Strong demand could also provide some modest upward impetus to inflation. In the absence of further price adjustments, inflation is expected to peak in the first half of 2006. Subsequently, inflation is likely to ease in the third quarter of 2006 following the lapse of the effects of price adjustments that were implemented in 2005. For 2006 as a whole, the average rate of inflation is estimated to be in the range of3.5% to 4%. The balance of payments position is expected to remain strong in 2006 with a continued large current account surplus supported by a strong trade balance. The projected strong growth in exports, based on the continued expansion in manufactured exports, in particular exports of electronics and electrical products, will contribute to the surplus in the trade account. In addition, growth in commodity exports is expected to be sustained by high prices and increases in volume. In the financial account, steady inflows of foreign direct investment (“FDI”) would also strengthen the overall balance of payments. A large portion of the FDI would be in the form of reinvestments by the existing MNCs in Malaysia. Policies in 2006 focus on initiatives to generate greater quality growth in the near ternl to provide a strong foundation for long-term sustainable growth. These initiatives would include various measures to enhance national resilience and the ability to meet emerging external challenges, arising from rising oil prices and increasing global compelition. The Federal Government’s overall financial position is expected to strengthen further in 2006 as the economy regains its growth momentum. The 2006 Budget is the first annual Budget for the Ninth Malaysia Plan (2006-2010). Fiscal policy in 2006 will thus focus on initiatives to generate greater quality growth in the near term to provide a strong foundation for long-term sustainable growth. The 2006 Budget put forth various measures to enhance national resilience and the ability to meet emerging external challenges arising from rising oil prices, higher global interest rates and increasing global competition. (Source: BNM’s Annual Report 2005, BNM Press Release on BNM Annual Report 2005 (Ref No. 03106103) and Ministry ojFinance Malaysia’s Economic Report 200512006) 10.3 General Industry Overview, the Regional Oil and Gas Industry and the Malaysian Oil and Gas Industry

Except as otherwise indicated, statistical and certain other information contained in the following description is based on or derived from data prepared by lnfocredit D&B. The information has not been independently verified by liS or any other person. Most of the available information is based on best estimates and should therefore be regarded as indicative only and treated with appropriate caution. General Industry Overview As our operations in relation to the offshore support services industry is directly related to the level of activities in the offshore oil and gas industry, we set out below an overview of the oil and gas industry. 10. INDUSTRY OVERVIEW (COllf’d) Essentially, the fluctuation in crude oil prices was very much related to the fundamentals of demand and supply conditions of the global market. In 2005, the International Energy Agency (“lEA”) estimated that global oil demand stood at 83.3 million bpd, an increase of 1.4% from the 82.2 bpd registered in the previous year. The strong global demand was mainly attributed to the robust industrialisation activities of China which translated to energy required and the US’s need to build up its inventory level. With the surging economy, China overtook Japan in 2002 to become the second largest oil consumer after US and accounted for at least one-third of the increase in global demand. Market sentiment was further heightened by the geopolitical risks in some producing countries, among others Russia, Venezuela and Iraq, resulting in risk premium inherent to crude oil prices widening significantly hence, higher speculative activities. In addition, the situation was further influenced by decisions made by the OPEC which accounts for almost 40% of global oil supply. Several factors are seen to have contributed to the generally high crude oil prices and are likely to keep them at or near present levels. First, worldwide petroleum demand growth is projected to remain robust, despite high oil prices. China’s demand growth slowed down in 2005 but is anticipated to rise in 2006. However, other developing countries are expected to fill in the gap. Second, expected growth in non-OPEC supplies is not expected to accommodate worldwide demand growth. Third, worldwide spare crude oil production capacity has recently diminished as non-OPEC producing nations have very linle spare capacity; in practice, only Saudi Arabia has considerable spare production capacity. Despite additions in Saudi Arabia and other Persian Gulf countries expected in 2005-2006, spare capacity is not projected to grow significantly over the next two (2) years. Fourth, downstream sectors such as refining and shipping services are expected to remain tight as well. Finally, geo-political risks, such as the continued insurgency in Iraq and political unrest in Nigeria and Venezuela as well as the uncertainty over the fate of Russia’s top oil producer Yukos, are expected to keep the level of uncertainty in world oil markets high. Meanwhile, gas is an increasingly popular fuel in Asia-Pacific, with narural gas demand expected to grow steadily and to continue to playa role as a volume-growth driver in the region. New LNG terminals are being built, especially across Asia-Pacific; new tankers are also being built and new companies are being established. Reflecting the booming natural gas industry, a number of LNG projects are in the pipeline running up to 2010, to meet the rising energy demand in Asia-Pacific. The projects include the MLNG in Malaysia, an expansion project in New South Wales, Australia, Phase Two ofRas Laffan in Qatar, Russia’s Sakhalin II and Tangguh at Irian Jaya, Indonesia. These projects aim to supply LNG to energy thirsty China and India, and to the existing markets of Japan, South Korea and Taiwan. The Middle East Region Oil and Gas Industry The Middle East region accounts for approximately 65% of the world’s proven crude oil reserves and more than 40% of the global proven natural gas reserves. The bulk is situated in the Persian Gulf. The Persian Gulf encompasses countries like Bahrain, Iraq, Iran, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates. Collectively, these countries hold around 57% of the global crude oil reserves. Even more significantly, the Persian Gulf countries normally maintain almost all of the world’s excess crude oil production capacity. These countries are expected to progressively increase their share of the global crude oil production over the next fifteen (J 5) years, according to the Energy Infonnation Administration in the US. In addition, countries like Iran, Qatar, Saudi Arabia and the United Arab Emirates hold the world’s second, third, fourth and fifth largest reserves of natural gas, respectively (Russia maintains the number one position). 10. INDUSTRY OVERVIEW (Cont’tl) With one-fourth of the world’s proven oil reserves and some of the lowest production costs, Saudi Arabia is likely to remain the world’s largest net oil exporter for the foreseeable future. Overall, Saudi Arabia may contain up to one (I) trillion barrels of ultimately recoverable crude oil. Saudi Arabia is the world’s leading oil producer and exporter, and is expected to remain the key player in the global oil and gas industry. Saudi Arabia maintains claims that it is easily capable of producing up to fifteen (15) million bpd in the future and maintaining that production level for another fifty (50) years. There were a total of 1,076 offshore platforms in the Middle East in 2004. Set out below are the Crude Oil and Natural Gas Reserves and Production in the Middle East: Crude Oil Natural Gas Country Reserves Production Reserves Production (billion barrels) (bpd) (Trillion cubic feet) (Trillion cubic feet) Saudi 26\.9 10,900,000 (2004) 235.0 2.1 (2003) Arabia Algeria I\.4 2,083,400 (2005) 160.5 2.90 (2003) Bahrain 0.13 44,000 (2003) 3.25 0.33 (2002) Kuwait 99.0 2,500,000 (2005) 55.5 0.29 (2002) Libya 39.0 1,580,000 (2004) 52.0 0.22 (2002) Oman 5.5 784,000 (2003) 29.3 0.53 (2002) Qatar 15.2 1,068,000 (2004) 910.0 \.0 (2002) Sudan 0.56 343,000 (2004) 3.0 0 U.A.E. 97.8 2,760,000 (2004) 212.0 1.53 (2002) [ran 125.8 4,259,800 (2005) 940.0 2.8 (2003) Iraq 115.0 1,942,000 (2004) 110.0 0.10 (2003) Syria 2.5 535,000 (2003) 8.5 0.205 (2002) Yemen 4.0 416,000 (2005) 16.9 0 Source: Infocredit D&B The Regional Oil and Gas Industry The Asia Pacific region is the third most important region in the offshore oil and gas industry, after the orth Sea and the Gulf of Mexico. It is expected to have the highest growth rate of all the eight (8) regions in the world, in terms of offshore exploration and offshore activities. It has also been estimated that around 20 billion hoe await prospectors in the region’s vast, but largely untapped deepwater acreage, representing more than 40% of the region’s proven oil reserves. Many countries in the region have had falling crude oil production rates for several years but have only recently begun addressing this decline by allowing exploration activities in the deepwater realm. 10. INDUSTRY OVERVIEW (Colll’d) Set out below are the cmde oil, and natural gas reserves and production in the Asian countries: Region I Crude Oil Natural Gas Country Reserves Production Reserves Production (billion (bpd) (Trillion cubic feet) (Trillion cubic feet) barrels) Malaysia 5.29 727.000 (2005) 85.2 1.99 (2004) Australia 1.5 553,331 (2005) 290 1.26 (2003) Brunei 1.4 196,000 (2003) 13.8 0.37 (2002) China 18.3 3,620,000 (2004) 533 1.21 (2003) India SA 632,000 (2005) 30.1 1.00 (2003) Indonesia 4.7 1,178,600 (2004) 90.3 260 (2003) Pakislan 0.Q3 60,000 (2004) 26.8 084 (2003) Philippines 0.20 25,600 (2005) 3.8 0.10 (2003) Thailand 06 296,900 (2005) 13.3 080 (2003) Vietnam 0.6 403,300 (2004) 6.8 008 (2002) Azerbaijan 10 319,200 (2004) 30.0 0.18 (2003) Kazakhstan 15.4 1,221,300 (2004) 65.0 0.50 (2003) Turkmenistan 0.6 260.000 (2004) 71.0 18 (2003) Uzbekistan 0.6 150,000 (2004) 662 2.07 (2004) Source: lnfocredit D&B The Malaysian Oil and Gas Industry Crude oil and condensate reserves increased from 4.5 billion barrels in 2000 to 5.3 billion barrels in 2005. The average production of domestic crude oil and condensate increased from 681,000 bpd in 2000 to 727,000 bpd in 2005. Based on this production level, which is in line with the National Depletion Policy, the reserves are projected tn last for nineteen (19) years. Although the total refining capacity declined from 591,000 bpd to 546,000 bpd, it was sufficient to meet the demand for petroleum products. The export of crude oil and condensate increased to 369,000 bpd with a value of RM28.5 billion in 2005. Major export destinations were Australia, Thailand, India, and the Republic of Korea. The discovery of new gas fields contributed to the increase in reserves from 84.3 tcf in 2000 to 85.2 in 2005 and is expected to last for 33 years. The average natural gas production increased from 4,367 million standard cubic feet per day (Ummscfd”) to 5,800 mrnscfd. Natural gas was also imported from West Natuna, Indonesia beginning 2002 and the Malaysia-Thailand Joint Development Area (UMTJDA”) in 2005. The average demand for natural gas in Peninsular Malaysia increased from 1,643 mmscfd in 2000 to 2,141 mmscfd in 2005. The power sector continued to be the major consumer accounting for 66%, followed by the non-power sector at 28%. The remaining 6.0% was exported to Singapore. To meet the increased demand from the non-power sector, the Natural Gas Distribution System (“NGDS”) was expanded from 455 km to 1,365 km. 10. INDUSTRY OVERVIEW (ConI'{/) Exports of LNG increased from 15.4 million tones in 2000 to 21.9 million tones in 2005, mainly to Japan, the Republic of Korea and Chinese Taipei. In 2005, total export earnings from LNG anlOunted to RM20.8 billion compared with RM 11.4 billion in 2000. (Source: Ninth Malaysia Plan 2006·2010, published by the Economic Planning Unit, Prime Minister’s Department, Putrajaya, 2006) Development of tbe Oil and Gas Industry in Malaysia According to the official record, the earliest recorded oil find was in Sarawak, discovered by the British Resident in July 1882. Initially the oil was used for medicinal purpose. In later years, the oil was used to light lamps and waterproofing ofboats. In 1910, Anglo-Saxon Petroleum Company, the forerunner of the present Sarawak Shell Berhad which was granted the sole right to explore for petroleum in Sarawak, began commercial exploitation when they struck oil in the town ofMiri. This marked the start ofthe Malaysian petroleum industry. The Miri success encouraged further attempts to discover other onshore fields. However, only traces of petroleum were found, and these were not large enough to justiry drilling activities. As a result, they had limited success in Miri, Sarawak. Subsequently, with the aid of technology, offshore exploration of oil started in Sarawak in the 1950s. In 1962, oil was discovered in two (2) offshore areas of Sarawak. Meanwhile, in Peninsular Malaysia exploration commenced in J968. However, it was not until 1971, that the first oil field was discovered in Peninsular Malaysia. Prior to the Petroleum Development Act, 1974, oil companies in Malaysia were operating under the concession system. The Government had little control over the concessions. In return, the oil companies paid royalties and taxes to the Government. By 1974, with the Petroleum Development Act, the Government established Petronas to manage the country’s petroleum resources in line with the nation’s aspirations. Petronas was accorded the ownership, exclusive rights, power, liberties and privileges of exploring, exploiting, winning and obtaining petroleum whether onshore or offshore of Malaysia. Petronas group comprises over 80 companies of which 43 are subsidiaries. The group is a fully integrated oil corporation, offering a wide range of activities from E&P (upstream activities) down to distribution of crude oil and petroleum products, gas processing, transmission and distribution, natural gas liquefaction, transportation and marketing of liquefied natural gas, and manufacturing and marketing of petrochemicals (all can be categorised as downstream activities). To effectively develop the oil resources, Petronas uses the PSC system. PSC contractors undertake the entire financing and bear all the risk with respect to exploration, development and production activities in exchange for a production share. In addition to Petronas, the other players in the E&P sector include ExxonMobilExploration and Production Malaysia Incorporated, an affiliate of ExxonMobil Corporation which is the largest crude oil producer in Peninsular Malaysia and Shell Malaysia. Shell Malaysia is one of the pioneers in the E&P sector in Malaysia. The rest of the field operators include among others, ConoccoPhillips, Murphy Oil, Amerada Hess, Talisman and Newfield. 10. INDUSTRY OVERVIEW (Cont’d)

10.4 Introduction & Background ofOIT.bore Support Services In the early days, oil E&P activities started onshore. Crude oil was produced onshore and transported using shallow draft tankers and crude oil barges. In tum, these were towed by tugs along the river to other tank fanns for storage or to storage tankers for export purposes. As oil production moved progressively from onshore to offshore, oil exploration, development and production activities increased in tandem. This resulted in mOTe companies stepping up their involvement in both the oil and gas, and offshore support services industries. Today, oil exploration has also ventured into deep-water exploration, which contains significant oil and gas deposits, with the aid of the latest technologies. Offshore E&P activities are dominated by gigantic integrated oil and gas companies and national oil and gas companies. Integrated oil and gas companies are fully integrated multinational companies that are geographically diversified and engaged in exploration, production, refining and distribution activities as well as ownership or partial ownership of petrochemical plants. Examples of such companies are Royal Dutch/Shell, British Petroleum and Exxon Mobil. National oil and gas companies, usually wholly owned by the Government, are vested with the country’s entire oil and gas resources and entrusted with the responsibility of developing and adding value to these resources. Primary examples of such companies are Petronas, PT Pertarnina of Indonesia, Petroleum Authority of Thailand, China National Offshore Oil Corporation, China National Petroleum Corporation, Saudi Arabian Oil Co. and Nigerian National Oil Company. Supporting these integrated and national oil and gas companies are companies providing a wide range of support services relating to the oil and gas industry. These support services could be provided at various phases of the value chain of the industry which encompasses services such as consultancy, engineering, fabrication and construction. pipeline maintenance and repair, marine transportation. drilling and well services, environment and safety, equipment repair and service, certification, verification and inspection, and others. 10. INDUSTRY OVERVIEW (Conl’tf)

Interest ……., Acquisition
Source: lnfocredit D&B Upstream and Downstream Sectors The value ehain ofthe oil and gas industry is diagrammatically illustrated below: ••Refining • Distribution


Downstream Activities
Various support services are involved in the upstream activities. Over the last thirty (30) years, various supporting industries have developed along side the oil and gas industry in Malaysia. The main beneficiaries from the upstream sector which support the E&P activities are companies involved in seismic surveys, exploration drillings, deep sea diving, drilling rigs rental, offshore logistic companies providing support and supply by way of vessels and helicopters. Since 80% of Malaysia’s oil and gas reserves are offshore, most of the E&P activities are concentrated around the continental shelves. The upstream activities may be broadly categorised into two (2) phases namely, exploration and production. Meanwhile, the downstream sector covers the following areas, such as: • transportation ofoil and gas (major pipeline systems, including pumping systems and compressors); • LNG systems (Liquefied Natural Gas including liquefaction and re-gasification
plant); • oil refineries, gas processing and petrochemieal plant; and
• marketing and sales of oil and gas-related products.

10. INDUSTRY OVERVIEW (Conl’l!) Essentially, once the oil and gas had been separated, the products would be transported via pipelines and! or vessels to the various processing plants. The gas and natural gas liquid would be further separated into various other gases such as methane before being channelled to distributors and industrial end users. Once the crude oil reaches the refineries and petrochemical plants, it will also be separated into many categories of oil and fuels as well as other chemical by-products. Classification of Support Services There is a wide variety of support services available to the offshore oil and gas industry. Our focus coverage is on the provision of offshore support vessels and services supporting the oil and gas E&P activities which is the main business activity of our Group, contributing approximately 94% of our Group’s revenue in 2005. The market segmentations of the oil and gas support services industry are set out below: Offsho::C Oil and Gas
Support Services’
PrO\ is IOn of Offshore Suhsca/l’ndcf\\ alecSupport Vessel.. & Others’ ISlirrorr Ser\ ices Sen Il”CS Note: • Others include fabrication! construction services, consultancy services, drilling and well services, equipment repair services. supply ofequipment and consumabJes, environmental & safety services. etc Source: Infocredit D&B Industry Linkages The offshore support services providers offer essential support to the oil and gas industry, operating primarily offshore of Malaysia. The services provided may take place at different phases of the offshore activities ranging from exploration to production stage. For offshore support vessels and services in particular, various services can be provided in each phase of the exploration, development and production activities as set out below: (i) Pre-Production Phase During this phase, the following offshore support services are required: to assist seismic operators to perfoml seismic surveys. Seismic surveys are carriedoutbyoronbehalfofoilandgascompanies to locateoilandnatural gas reserves in the seabed. In this scenario. vessels are essential to accommodate and carry seismic equipment; to assist the deployment of spreader lines which are used to identify and detect the presence ofoil and natural gas in the seabed; 10. INDUSTRY OVERVIEW (Cont’tIj (ii) (iii) to refuel other offshore support vessels used in seismic operations as it is not feasible for these vessels to call into port to refuel their tanks during the process of ongoing seismic operations; to provide chase boat activities to caution other ships against approaching into areas where oil and gas exploration process is being carried out, such as seismic operations and during deployment of spreader lines; and to transport personnel between platforms and two-way transportation between shore and rigs during crew changes as well as other necessities such as food, beverages and other grocery supplies. Drilling Phase Once the drilling site has been identified by the oil company, a rig will be deployed to drill the exploratory well in the oil company’s allocated concession. During this phase, the following offshore support services are required: to tow and moor rigs offshore to the exact location based on the given co­ordinates; to position anchor of the rig at the drilling location; to transport bulk cargo such as cement, barite, base oil mud, brine, gas oil required for drilling operations, deck cargo such as pipes, equipment and spares; to tow floating equipment, barges and to provide assistance to other vessels when they are on standby duties including provision of fuel, water and other consumabJes and assisting in crew changes; to provide standby duties such as fire-fighting duties, anti-pollution and prevention measures to react to oil slicks and offshore fires, search and rescue operation when required; and to assist pipe-laying, cable-laying, jacket commISSioning or decommissioning through the deployment of remote operated vehicles into the oceans and diving operations which are necessary for the repair and maintenance of platfonns~ pipelines and cables in the oceans. Production Phase Once the drilling operation is completed and decision is made to commence oil and gas production, the rig will be towed away and production facilities have to be built with platforms and pipelines installed. Normally, a cluster of several platforms for production, processing, accommodation and drilling facilities are also required to be built offshore which can be linked together with inter-connecting pipes and bridges. FPSOI FSO platform are used as an alternative to fixed platforms in some offshore production fields which require offshore vessels to support in various ways. During the production phase, the following offshore support services are essential: to assist the demobilisation of rigs after completion of a drilling operation and towing away the rigs; to assist the towing, setting up and mooring of the FPSOIFSO platforms to the oil welliocalion; to anchor the FPSOIFSO platforms to the location ofoil production; 10. INDUSTRY OVERVIEW (Cont’li) to transport bulk cargo such as cement, barite, base oil mud, brine and gas oil which are required for the drilling operations and deck cargo such as pipes, equipment and spares; and to transport personnel between platforms and two-way transportation between shore and rigs during crew changes as well as other necessities such as food, beverages and other grocery supplies. (iv) Post-production Phase This is final stage of the drilling I production process whereby offshore support services are still required to decommission the platforms. While demobilising activity is being carried out, some of the following support services may still be on­going: to assist the demobilisation of FPSOIFSO or platform. Tbe decommissioned platform structure is either towed away or placed on deck the offshore support vessels for transportation back to shore; to provide standby duties such as fire-fighting and anti-pollution and prevention measures to react to offshore fires and oil slicks respectively; to transport personnel from one platform to another platform, to and from shore to rigs during crew changes as well as other necessities such as food, beverages and other grocery supplies; and to provide support services during well-killing. Well-killing is the process whereby the oil wells are being sealed after they are exhausted.
10. INDUSTRY OVERVIEW (Cont’tl) Provision of support services to the offshore oil aod gas E& P activities .’ -…;~,._-,;, Offshon;.Support ~l”!,tteam Oil & G’!.v .~; . Activities~-:~h~’-­Services . -,.;.”,. Provisioo of Offshore Support Vessels and Services: • Anchor handling • Chase boat activities
• Mooring

• Survey and utility boat activities • Towing
• Transportation of crew and

supplies • Transportation of underwater Pre-driIling pipelines ~loration • Others Provision or Sub-seafUnderwater Support Services: • Maintenance, repair and inspection • Underwater welding and cutting • Underwater survey
• Underwater painting

• Water blasting
~:I~:’Y>_~ • Sanrration diving ~­• ROY inspection • Others “~ Development Source: Infocredit D&B 10. INDUSTRY OVERVIEW (Cont’d) Product I Service Definition The offshore support vessels and services employ various types of vessels, referred to broadly as offshore support vessels. Offshore support vessels are generally classified into the following classifications derived from their primary or predominant operating characteristics or capabilities. Currently, our Group own a total fleet size of fifteen (15) vessels comprising Platform Supply Vessel, Anchor Handling Tug, Anchor Handling Tug Supply Vessel, Straight Supply Vessel, SurveylUtility Vessel and Diving Support Vessel. (i) Platform Supply Vessel (“PSV”)/ Straight Suply Vessel (“SSV”) PSVS/SSVs serve drilling and production facilities and support offshore construction and maintenance work. They are differentiated from other offshore support vessels by their cargo handling capabilities, particularly their large capacity and versatility. PSVs/SSVs utilise space on deck whilst space below deck is used to transport supplies such as fuel, water, drilling fluids, equipment and provisions. Generally, PSVs/SSVs range in size from 150 ft to 200 ft however, there are larger PSVs/SSVs (“Lg PSVslLgSSVs”) ranging up to 275 ft in length and are particularly suited for supporting large concentrations of offshore production locations because of their large, clear above deck and below deck capacities. (Ii) Anchor Handling Tug (“AHT”)/ Anchor Handling Tug Supply Vessel (“AHTS”) AHT/AHTS vessels are used primarily to handle and set anchors for positioning, mooring drilling rigs, towing mobile drilling rigs and for standby fire-fighting duties. In addition, AHTS vessels can also be deployed to transport cargo from one location to another due to its bigger deck space. These vessels can also be typically used in limited supply roles when they are not performing anchor handling and towing services. Occasionally AHTS vessels function as PSVs/SSVs. (iii) Standby Rescue Vessels (“SRV”) SRV performs safety patrol and is required for all manned locations. These vessels typically remain on station to provide a safety backup to offshore rigs and production facilities and carry special equipment to rescue personnel. They are equipped to provide first aid and shelter and, in some cases, also function as supply vessels. (iv) Crew boat Crew boat transports personnel and cargoes to and from production platforms and rigs. Older crew boats (early I980s build) are typically 100 ft to 120 ft in length and are designed for speed to transport personnel. Newer crew boat designs are generally larger, 130 ft to 165 ft in length and can be longer with greater cargo carrying capacities. They are used primarily to transport personnel and cargoes on a time­sensitive basis. (v) Work Boat & Work Barge A work boat or work barge generally has special features to meet the requirements of specific jobs. The special features include large deck spaces, high electrical generating capacities, slow controlled speed and varied propulsion thruster configurations, extra berthing facilities and long-range capabilities. These vessels are primarily used to support offshore facilities maintenance, diving operations and ROV operations. (vi) Survey Vessel (“SV”) A survey vessel is designed to support hydrographic and oceanographic research as well as survey operations and seismic data gathering. 10. INDUSTRY OVERVIEW (Cont’tl) (vii) Utility Vessel (“UV”) These vessels are typically 90 ft to 150 ft in length and are used to provide limited crew transportation, oil field support equipment transportation and, in some locations, UV serves as a standby function. (viii) Diving Support Vessel (“DSV”) This vessel facilitates underwater diving especially saturation diving. However, its functions can be integrated to provide a versatile base for a variety of activities. In addition to a saturation diving spread, most DSVs are equipped with a heave compensated crane, ROVs and possibly an air diving spread (for shallow dives down to -30 m). This makes it a more versatile ship capable of performing several different construction tasks as well. 10.5 Industry Dynamics 10.5.1 Market Performance and Trend The demand for offshore support vessels and services in the oil and gas industry is directly related to the performance and activities of the laner. Oil and gas companies decide to embark on their E&P decisions based on the crude oil and natural gas reserves, geology, national production policies, national depletion policies, price of crude oil and natural gas in the market, political climate, the land and lease conditions, the distance from markets and pipelines and the cost of operating. Historically, some petroleum development in Malaysia had been delayed by the National Depletion Policy formulated in 1980 which was aimed at safeguarding the oil reserves in Malaysia. The policy gives Petronas the right to dictate the country’s level of production, development timing and production levels of oil fields with in­place reserves. While new shallow water crude oil and natural gas discoveries are still likely, deepwater exploration will most probably become the focal point of the upstream sector as only about half of the identified exploration areas have been explored. The recent rash of discoveries is set to spark a boom in jobs for service providers like our Group. I 10. INDUSTRY OVERVIEW (Cont’tl) 10.5.2 Market Demand and Supply Globally, there are approximately 7,300 oil and gas platforms. Detail locations of these platforms by regions for the period of 1980 to 2004 are depicted in the following tahle: Other Parts Of Centra) US North & South Middle Asia Year Gulf” America America Europe* East Africa Pacific Tot.1 1980 2,367 102 118 250 325 156 231 3,549 1981 2,514 114 142 262 396 192 271 3,891 1982 2,689 133 159 286 466 233 344 4.310 1983 2,797 144 176 308 548 264 424 4,661 1984 2,930 152 192 338 635 299 475 5,021 1985 3,030 161 206 368 705 316 522 5,308 1986 3,087 169 219 393 772 328 568 5,536 1987 3,138 171 228 415 789 350 596 5,687 1988 3,187 172 242 440 794 366 625 5,826 1989 3,251 173 248 458 804 377 648 5,959 1990 3,318 181 251 479 815 398 674 6,116 1991 3,361 187 252 491 824 422 704 6,241 1992 3,346 192 255 519 866 445 740 6.363 1993 3,307 196 259 557 898 463 774 6,454 1994 3,311 205 266 582 917 475 802 6,558 1995 3,313 205 267 614 940 483 830 6,652 1996 3,350 205 268 636 964 511 853 6,787 1997 3.343 206 282 649 975 547 900 6,902 1998 3,358 207 301 672 1,004 567 951 7,060 1999 3,330 222 313 694 1,027 577 981 7,144 2000 3,286 239 320 716 1,045 584 997 7,187 2001 3,278 249 322 729 1,049 587 1,029 7,243 2002 3,262 249 325 740 1,071 591 1,052 7,290 2003 3,227 252 327 757 1,074 599 1,095 7,331 2004′ 3,233 253 332 767 1,076 608 1.107 7,376 Notes: A Takes into account possible removals Includes Mediterranean Sea # Latest figure available as at October Source: tnfocredil D&.B As for Malaysia, it is estimated that there are 253 offshore oil and gas platforms in the upstream sector. They present tremendous opportunities to the offshore support vessels and services companies along every step in the value chain. In view of Petronas’ intention to increase production by 3% over the next five (5) years, it is anticipated that mOTe platfonns will be built hence increasing the demand for offshore support services especially the services of offshore support vessels. 10. INDUSTRY OVERVIEW (Con/’d) 10.5.3 Competitive Environment Generally, the offshore support vessels and services industry perceived to be a competitive industry. Competing players in this industry are wide and include companies in various sizes ranging from large MNCs to local companies, both large and small. To remain resilient against adverse market conditions and stay ahead of competition, the competitive factors behold are price and quality of vessels and services. Presently, there are fifteen (IS) major players in Malaysia that are engaged in the provision of offshore support vessels and services. Currently, these players in aggregate owned approximately 160 vessels which consist of various types of offshore support vessels, as illustrated in the following table. It is noteworthy that the number of offshore support vessels is constantly changing as the demand is dependant on the level of exploration, development and production activities in the oil and gas industry. [The rest of this page is left blank] 10. INDUSTRY OVERVIEW (COliI’d) Malaysia: Major Players in Offshore Support Vessels and Services, by Type of Vessels PSV/ AHT/ Work boat! Company SSV AHTS SRV Work barge Ajang Shipping Sdn Shd X X AMRB XXX X Bumi Armada Navigation Sdn Bhd XX X Coastal Contracts Bhd X X Jasa Merin (M) Sdn Shd X X X Perkapalan Mesra Sdn Bhd X X X Petra Perdana Berhad· X X X Scomi Group Berhad” X Sealink Sdn Shd X X Scmaring Logistics (M) Sdn Shd X Syarikat Boreas Shipping Sdn Bhd X Tanjung Offshore Berhad X Tidewater Marine Services (M) Sdn Bhd*'” X X Viva Omega Sdn Bhd X Wira Swire Sdn Bhd X Notes: PSV-Platform Supply Vessel SSV-Straight Supply Vessel AliT -Anchor Handling Tug SV-Survey Vessel AIITS-Anchor Handling Tug Supply uv-Utility Vessel SRV-SlondbyRescue Vessel DSV-Diving Support Ve~’J’el Crew -Crew boar TIB -Tug IBarge Others -Dredger. Landing Craft. Pilot/Mooring .. Through its .subsidiaries, Ampangship Marine Sdn Bhd and Intra Oil Services Berhad ” Through ajoint-\’enture (‘omptmy, Oilserve Marine Sci” 8/ul, with SnpuraCre.~1 Petroleum Shd n A pri”cipal/or Nubayu Offshore Company Sdn Bhd Sources: In/ocredit D&B Crew  SV  UV  DSV  T/B  Olhers  X X X  X X X X  X X X X X X  X  X X X X  X X X  X  X  X  X  X  X  X  X X  X
160 10. INDUSTRY OVERVIEW (Co1lI’d) 10.5.4 Barriers to Entry • Capital Intensiveness Generally, the oil and gas support services industry is geared towards heavy capital commitment. This is mainly atrributable to the costs of any products, equipment, machinery and vessels, which are on the high side as it often involved technical complexities in designing and building. Although the purchasing of equipment, machinery and vessel can be financed through bank borrowings, buyers are still required to fund the rest of the balance via internal Source for downpayment. Under circumstances whereby bank borrowings are not available due to poor financial standing, operations may be severely disrupted in view of the absence of the relevant equipments and vessels to honour the contracts secured or to secure new contracts. In addition, more often than not, a banker’s guarantee which usually ranges between 5% and 20% of the contract value is required from the bidder or contractor. These challenges pose high barrier to entry because financing and other bridging facilities are not easily obtainable without a good track record in the industry. • Industry Knowledge and Technical Competency Players providing the support services to oil and gas companies need to ha vc the relevant industry knowledge and technical skills in order to offer safe and satisfactory services. This involves effective process management in the entire support activities which refers to the planning, executing, monitoring and reviewing process. They must keep abreast with the latest technological development and market trend in order to build and maintain the business relationships with their customers. The players must be able to identify the equipment andlor service that are fit-for-purpose for a specific task. Besides, the technical personnel must be teciUlically competent in order to multi-task on a vessel. Furthermore, a company must have the technical integrity in the pialUling, evaluating, recording, documenting, organising and training in order to ensure that its support services meet the standards in accordance to the work scope specified by the clients. • Proven Track Record The long period of time required in establishing a strong track record and building up the relationships with clients can prove daunting to newcomers. It is mutually beneficial for both customers and suppliers to form long­standing relationships once the quality of services are accepted and recognised. Oil and gas companies are more inclined to use products and services from support services companies with a proven track record. In this context, well-established companies will most likely be the preferred choice. They are often viewed as the strategic partners by oil and gas companies where both parties seek to gain greater economic value in such project-specific partnership. These emerging business practices in the oil and gas industry will be a significant barrier of entry for many new players to the industry. 10. INDUSTRY OVERVIEW (Cont’d) • Licensing and Certification Requirements The oil and gas industry in general is a highly regulated industry. From the Malaysia perspective. the authority is vested with Petronas whereby operators or service providers are required to possess the relevant licences issued by Petronas in order to provide services to Petronas and other oil and gas operators. Without the requisite licence, one is not allowed to participate in the bidding process. In addition, the MOF is also regulating the industry through the issuance of relevant licence. Apart from the above licences. service providers such as our Group must also adhere and confonm to thc Malaysian legislations and international standards for safety management, operation as well as pOllution controls. In addition, all vessels are required to have the necessary certifications from international classification societies such as the ABS and DNV prior to commencement of operations. The licensing and certification requirements act as a deterring factor for new entrants as they arc not easily attainable while conformity to international standards involves various procedures and substantial amount of documentations. • Substitute products / Services There is no substitute to offshore support vessels as means of transportation for the petroleum companies as they rely on this industry in supporting their activities at various stages of exploration, development and production. 10.6 Industry Challenges 10.6.1 Uncertain Operating and Regulatory Administration Many oil and gas companies are cautious about high levels of investments in parts of Asia due to uncertain operating and regulatory regimes. Some offshore reserves lie in contested waters, such as parts of the South China Sea (Spratly islands). the East China Sea (Diaoyu! Senkaku islands) and the East Timor Sea (Timor Gap). Conflicts over drilling areas have flared up between Malaysia and Brunei (Kikeh oilfield), Malaysia and Indonesia (Ambalat islands in the Celebes Sea) and China and Japan (Diaoyu! Senkaku and Okinotorishima islands). In Indonesia, many oil and gas companies are hesitant about venturing into E&P activities due to the slow pace of liberalisation in the oil and gas industry that affects the confidence of foreign companies.
10.6.2 Consolidation and Rationalisation in the Oil and Gas Industry Consolidation and rationalisation have been the key word in the oil and gas industry over the last decade. In tandem with the widespread mergers and acquisitions taking place in the business world, many petroleum companies are also merging so as to achieve economies of scale and higher crude oil reserves. The trend is also driven by globalisation forces as most of the oil and gas players are global in nature. The markets, prices and profitability are all tiglilly inter-linked between regions by extensive trade and competition. The net effect is that there are fewer petroleum companies in the scene while the number of supporting services companies remain fairly constant. By virtue of this, service providers supporting the oil and gas industry must be able to demonstrate quality services and meeting customer demand for vessels equipped with greater technological capabilities and larger in size as well as reliability in order to remain competitive. 10. INDUSTRY OVERVIEW (Cont’tI)
10.6.3 Sbortage of Skilled Tecbnical Staff There is a sbortage of skilled technical personnel in the oil and gas suppon services industry. A skilled staff takes a few years to train and there is no guarantee that he or she might be poached by another company in the industry afier the training is completed. The relatively small pool of seafarers, technicians, divers and engineers is due to the fact that the offshore support services industry is highly specialised in nature. As the oil and gas industry is seeing steady gro\\th in activities, there is knock-on demand placed within the economic area for extra human resources to fuel the additional work levels. Added to this is the use ofmulti-functional teams needed to operate in different geographic locations and environments.
10.6.4 Project-Based Business One of the industry challenges faced by companies providing supporting services is to maintain a stable source of income due to having a majority of income derived from project-based businesses. Oncc the tenn of thc project is completed, the support services companies would have to source for new projects to derive a new source of revenue. The exception is that the contracts are renewed for another fixed period of time, when the oil and gas companies are satisfied with their work. Hence, fluctuations in revenue are quite normal in project-based businesses. On a positive note, some service providers like our Group view this as an advantage where they could explore the best possible deal from time to time. Although long tenn contract is perceived to be providing a secured revenue stream? there could be risk involved in entering into unfavourable arrangement rate due to unforeseen circumstances throughout the long contract period.
10.6.5 Greater Demands on Support Services Companies in Deepwater Environment In deepwater environment, the field architecture, technology and concept options are more complex and diverse and hence present greater risks. The need for a myriad of floater designs and sub-sea systems require extensive engineering expertise to manage a multitude ofequipment and systems interface. The high risks present in deepwater development demands greater diligent risk mitigation, with the greatest investment of expertise vested in both operators and contactors. At the onset of the front-end engineering development, the operators will involve the engineers, fabricators and installer in early planning, thus creating a dialogue for optimum project development and reliable operations. The front-end engineering development phase identifies and mitigates uncertainty or risks. The further the offshore platfonn is located from land, the greater is the risk and the smaller the pennissible margin of enor.

10.7 Outlook and Positioning Market Growtb Factors The market growth factors of the oil and gas industry are as follows: 10.7.1 Increasiog Demand for Oil and Gas Oil and gas are expected to account for around two-thirds (213) of global energy consumption by 2020. Similar to other commodities, the industrialisation and economic gromh of China have led to voracious demand for crude oil and natural gas. China overtook Japan to become the second largest consumer of oil and gas in 2002, afier the US. The country is projected to account for 25% of global oil consumption by 2025. The global consumption of oil rose by 2.5 million bpd in 2004, the sharpest rise in demand in 30 years. 10. INDUSTRY OVERVIEW (Coll/’d) 10.7.2 10.7.3 China’s annual oil bill is running at about USD89 billion, or 5.3% of GDP, twice as high as the global average. In the case of South Korea and Taiwan, the comparative figures are 4.4% and 2.9%. These figures illustrate the importance of oil and gas supply to some of Asia’s leading economies. The effect is to spur additional E&P activities, with the spill-over effects reaching the services support companies eventually. Rising Crude Oil Prices Rising crude oil prices have spnrred the oil and gas industry to undertake more E&P projects. Due to strong demand, prices of crude oil increased by a compound annual growth rate of 12.9% between the years 2000 and 2005. As a result, oil and gas fields that were deemed uneconomical and marginal in the past were reassessed and found to be economical by petroleum economists and geologists. Exploration activities in the oil and gas industry are akin to research and development activities in the manufacturing sector. New and future projects initiated by the giants in the oil and gas industry are deemed essential to close the global supply-demand gap for energy. Set out below are the average crude oil prices between 2000 and 2005: USDlbarrel 2000 2001 2002 2003 2004 2005 CAGR Crude Oil 27.60 23.12 24.36 28.10 36.05 50.64 -16.2 5.4 15.4 28.3 40.5 12.9% increase Source: ItljQcredi{ D&8 New Frontier in Deepwater Exploration The next impetus for growth in the oil and gas industry would be in deepwater and ultra-deepwater explorations. With oil and gas resources being finite, oil and gas companies are going further afield to recover hydrocarbons from remote locations. Deepwater refers to water depth of between 200 metres and 1,000 metres while ultra­deepwater refers to water depth beyond that. Many terrestrial techniques do not work well in deepwater situations. The cost of drilling just one dry well in a deepwater environment is in excess ofUSD50 million. Over the past few years, there have been drastic changes in technology that greatly reduces the cost of accessing petroleum deposits. Both ultra-deep platforms and next generation seismic-imaging techniques allow reservoirs to be envisaged on a screen in a matter of minutes rather than months. Seismic surveys use acoustic waves generated by the explosions to scour the sea floor for the right petroleum source rocks. The arrival of three dimension seismic imaging in the late eighties and nineties helped altered the oil and gas industry. However, there is still room for additional improvement. Another potential technological advance lies in the development of smarter drill bits that encase sensors capable of measuring conditions in the surrounding rocks. They act as the eyes and ears for the driller, by looking far ahead of the drill bit and communicating to the operator in real time. Electromagnetic mapping is also an emerging technology, utilising a series of receivers dropped in a specific pat1ern on the seabed. A ship tows a machine that sends out electromagnetic waves over the sea floor. The signal received by the transmitters is affected by the resistance it encounters. Hydrocarbons show a higher level of resistance compared to water, rock or sediments. The technology was originally used by geologists and geophysicists to study volcanic systems. Deepwater exploration activities are primarily found in Brazil, Gulf of Mexico, Norway, Angola and Nigeria. Malaysia has announced several major deepwater crude oil finds in East Malaysia, with an estimated 1,540 million boe. 10. INDUSTRY OVERVIEW (Cont’d) Deep water exploration is the ultimate frontier of the petroleum industry, with the maturing of existing petroleum fields. Oil and gas companies are expected to continue increasing their capital spending to offset declining production volumes and to increase their reserves to meet the anticipated demand for crude oil in the future. Forecast for Global Deepwater and Ultradeep Water Expenditures (USD Million) Region  2005  2006  2007  2008  2009  CAGR  (%)  Africa  4,303  5,442  5,183  4,490  22,617  51.4  Asia  812  841  879  841  3,599  45.1  Australasia  242  134  241  263  920  39.6  Europe  400  809  1,164  591  3,063  66.3  Middle East  0  78  12  85  198  275.1  Latin America  2,864  2,690  2,511  3,263  13,581  47.6  North America  2,515  3,704  2,499  1.907  13,192  51.3  Total:  11,136  13,698  12,489  11,440  57,170  50.5
Source: Infocredit D&B Malaysian Deepwater Fields Field Discovered Estimated reserves Onstream Operator (million boc) Kamunsu East 1999 120 2009 Sabah Shell Kamunsu East North 2000 185 2008 Sabah Shell Kikeh 2002 560 2007 Murphy Oil Kikeh Keeil 2003 100 2009 Murphy Oil Gumusut 2004 300 2008 Sabah Shell Kakap 2004 75 2010 Murphy Oil Senangin 2004 100 2010 Murphy Oil Malikai 2004 100 2009 Sabah Shell Source: Infocredil D&B 10,7.4 Increasing Underwater I SUb-sea Operations (a) Installation and maintenance In special circumstances, for example where large diameter gas pipelines are used, some operators decided, as a result of their assessments, to provide additional pipeline protection by installing sub-sea isolation systems to give further protection of the installation and the persons on it against the failure ofthe topside emergency shutdov,,,, valve or the rupture ofthe pipeline riser. This was also due to the increasing general emphasis on safety by oil and gas companies since the Alpha Piper disaster in the North Sea in 1988. Circumstances like these would require specialised equipments such as ROV to be deployed to deepwater to undertake survey and sampling activities. In tum, offshore support vessels are used to support these actiVities. 10. INDUSTRY OVERVIEW (Cont'<l) 10.7.5
(b) Corrosion in the Oil and Gas Industry Corrosion refers to the deterioration of a metal or its properties and it attacks every component at every stage of every oil and gas field, from casing strings to production platforms. It happens on every marine structure in oxygen-rich environments and wells exposed to sulphide stress. Although offshore installations are often painted with zinc-rich primers to form a barrier against rain, condensation, sea mist and spray, the splash zones are often subjeeted to severe corrosion while the jackets of a production platform sink into the seabed and prone to attack by hydrogen sulphide produced by sulphate-reducing bacteria Hence, corrosion monitoring and inspection are critical in order to prevent downtime and disaster from occurring. Preventing corrosion is vital in every step of the oil and gas industry. As it is almost impossible to prevent corrosion ITom taking place, it is apparent that controlling the corrosion rate maybe the most economical solution. In this context, corrosion engineers are increasingly involved in estimating the cost of their solutions on corrosion prevention and estimating the useful life of the equipment. At the same time, inspection also takes place to complement the task. All these would require specialised equipments as well as divers to carry out the operations and the utilisation of offshore support vessels to ferry the equipments and personnel. (c) Start of Decommissioning Era Many oil and gas platforms are approaching the end of their lifecycles in the Asia-Pacific region. This heralds the start of the decommissioning era in the oil and gas industry due to aging offshore platforms. With eongested waterways and increasing cargo ship traffic, the proper decommissioning of oil and gas platforms is essential. A collision involving oil tankers at sea due to improper disposal of oil and gas platforms would be disastrous to the economic wellbeing of the littoral countries. Out of the over 7.000 active platforms in the world, more than a quarter of the platforms are over 25 years old and reaching the end of their intended design lives. Currently, Malaysia has around 253 offshore platforms in the oil and gas industry. Out of this amount. 28 platforms are over 25 years old while another 11 platforms are over 30 years old. This would require the support of offshore vessels in carrying the decommissioned parts back to the shore as well as the requisite equipments to perform the deeommissioning. Growing Demand for Non-Destructive Testing Services Non-destructive testing is an extremely important field in the industrial sector. Although it is sometimes considered a matured field, there are more innovative methods being invented periodically that enable tiny flaws on materials invisible to the naked eye to be seen. With both safety and quality issues are paramount in the workplace, non-destructive testing is a necessity and not a luxury. It assists companies to ensure that they are producing quality products as well as maintaining safety in the workplace. The traditional role of non-destructive testing in quality control has been augmented with material characterisation, stress management and inspections in-service in recent years. The correct application of non-destructive testing can help to prevent accidents, save lives, protect the environment and avoid economic loss. 10. INDUSTRY OVERVIEW (Conl’d) 10.8 Contribution to the Country’s Economy Malaysia aspires to become a maritime nation by 2020, hence the contribution of the maritime sector towards the growth and dynamism of the Malaysian economy is significant. Various establishments were set up such as the Maritime Institute of Malaysia and Malaysia Maritime Academy in achieving this vision. The fanner focuses on the research of implementing a National Ocean policy in the context of protecting and enhancing the larger trade interests of the Malaysian economy while the latter is an institution providing maritime education and training. The oil and gas offshore support services industry involve a multi-disciplinary team of specialists in particular seafarers and underwater engineers and technician. Of significance too are the services that support the efficient functioning of the support services sector, especially ship building and ship repairing. In this aspect, our Group is moving in tandem with the nation’s vision through employment and nurturing of multi-disciplinary specialists. It also commissions local ship builders and operators for new vessels building and vessels repairs/maintenance. This contributes to curbing foreign exchange outflow. In general, OUT Group is operating within an industry that contributes to the nation’s economy in the sense of strengthening the overall balance of payments via supporting the oil and gas E&P activities that has attracted substantial foreign direct investments. 10.9 Government Legislations, Incentives and Policies 10.9.1 International Codes and Standards (i) The United Nations Convention on the Law of the Sea (“Convention”). The Convention came into force in 1994. On 14 October 1996, Malaysia became a party to the Convention. The Convention lays down a comprehensive regime of law in the world’s oceans and seas establishing rules governing all uses of the oceans and their resources. Today, it is the globally recognised regime dealing with all matters relating to the law of the sea. Among the important features of the Convention are navigational rights, territorial sea limits, economic jurisdiction, legal status of resources on the seabed beyond the limits of national jurisdiction, passage of ships through narrow straits, conservation and management of living marine resources, protection of the marine environment, a marine research regime and, a more unique feature, a binding procedure for settlement of disputes between parties to the Convention (“States”). Under the Convention, coastal States have sovereign rights in a 200 nautical mile exclusive economic zone with respect to natural resources and certain economic activities, and the exercise of jurisdiction over marine science research and environmental protection. (ii) SaLAS Convention The main objective of the SaLAS Convention is to specify minImum standards to be met for the construction, equipment and operation of ships, to ensure overall safety of passengers and crew of ships. The SaLAS Convention is regarded as the most important of all international treaties concerning the safety of the ships, whereby regulatory controls and standards are imposed covering areas as below: Construction-Subdivision and stability, machinery and electrical installations; Fire protection, fire detection and fire extinction; Life-saving appliances and arrangements;
10. INDUSTRY OVERVIEW (Cont’d) Radio communications; Safety of navigation; Carriage of cargo; Carriage of dangerous goods; Nuclear ships; Management for the safe operation of ships; Safety measures for high-speed craft; Special measures to enhance maritime safety; Additional safety measures for bulk carriers; and Tanker safety and pollution prevention. (iii) ISM Code 2002 The ISM Code 2002 was made mandatory through SOLAS and addresses the responsibilities of the people who manage and operate ships and to provide a common international standard for the safe management and operation of ships and for pollution prevention. The purpose of this ISM Code 2002 is not only to provide an international standard for the safety management and operation of ships and for pollution prevention, but also act as a platform to support and encourage the development of a safety culture in shipping. All governments are invited to take the necessary steps to safeguard the shipmaster in the proper discharge of his responsibilities with regards to maritime safety and the protection of the marine environment. ISM Code 2002 is applied to all ships internationally. There are basically several areas which ship owners should pay critical attention to whilst complying with this Code namely safety management, operation of ships and environment protection. (iv) ISPS Code ISPS has been identified as vulnerable to global terrorism. Initiated following the aftermath of the September I I incident, the IMO members of most countries formally adopted various security related amendments to the SaLAS Convention of 1974, including the introduction of ISPS Code. The purpose of the ISPS Code is to provide a standardised, consistent framework risk evaluation, which enables governments to offset changes in threat with changes in vulnerability for ships and port facilities. The ISPS Code is applicable to passenger ships and cargo ships greater than 500 gross tonnes, and mobile offshore drilling units. Under the ISPS Code, ship owners must undertake a Security Assessment, develop and implement a Security Plan for each applicable vessel in their fleet. Compliance with the ISPS Code results in the issuance of an International Ship Security Certificate (“JSSC”) that is valid for five (5) years. [0.9.2 Malaysia Regulations and Legislations (i) Petronas licence Petronas is Malaysia’s national petroleum corporation established under the Petroleum Development Act. Petronas is wholly-owned by the Malaysian Government. According to the Petroleum Development Act, the entire ownership in, and exclusive rights, powers, liberties and privileges of exploring, exploiting, winning and obtaining petroleum whether onshore or offshore of Malaysia shall be vested in Petronas. 10. INDUSTRY OVERVIEW (Cont’d) (ii) Under the Pelroleum Development Act, the Prime Minister ofMaJaysia may make regulations for the purpose of carrying into effect the provisions of the Petroleum Development Act and such regulations may, in particular, provide for the conduct of or the carrying on of (i) any business or service relating to the exploration, exploitation, winning or obtaining of petroleum; (ii) any business involving the manufacture and supply of equipment used in the petroleum industry; and (iii) downstream activities and development relating to petroleum. Petronas licenses are issued under the regulations of the Petroleum Development Act and allow the holders to supply equipment, facilities and services to Petronas, its group companies and also to other companies dealing with exploration and obtaining oil and natural gas in Malaysia. Petronas licenses specifY the scope of supply of services and equipment a licensee is allowed to carry out. Company groups are prohibited from having more than one Petronas licence with a specific scope of supply of services and equipment. Company groups with more than one of the specific permitted scopes under a Petronas licence are required to elect to surrender the excess licences it holds so that its group only holds one Petronas licence for each specific permitted scope. The Petronas license general conditions specifY that the licences are not transferable and licensees are prohibited from appointing any other company as its principal, agent, sub-contractor or otherwise, to provide any service or to supply any facilities or equipment on its behalf without prior approval from Petronas. Licensees are required to employ local Malaysian workers and foreign workers are only allowed if it can be proved that no local workers are available. Licensees are also required, unless otherwise approved by Perronas, to carry on its business activities in Malaysian and to utilise local facilities such as banks, insurers or other professional services managed by Malaysian firms or companies established or incorporated in Malaysia. Licensees must notifY Petronas of any changes such as the status of its equity ownership, directorship and management personnel within fourteen (14) days from the occurrence of such changes. Failure to comply with these conditions could result in the revocation of the Petranas licence. Petronas licences are renewable either annually or every two years. Malaysian Shipping Ordinance 1952 (“MSO”) In Malaysia, the law pertaining to registration of ships is now governed entirely by the MSO. The Ministry of Transport implements the Malaysian Government’s cabotage policies under which the Iransportation of goods in domestic trades are reserved for ships flying the Malaysian flag. A rew issues in ship registration are highlighted as below: Obligation to Register Malaysian Ships Every Malaysian ship unless exempted otherwise shall be registered under the MSO. If a ship required by the MSO to be registered is not so registered, she shall not be recognised as a Malaysian ship. A ship required by the MSO to be registered may be detained until the master of the ship, if so required, produces the certificate of registry of the ship. 10. INDUSTRY OVERVIEW (Cont’d) (iii) Exemption from Registry The following ships are exempted from registration: (a) any ship not exceeding 15 tonnes net used for navigation ou the rivers and coastal waters of Malaysia;
(b) any vessel licensed under section 475 (A603/84) of the MSO; and Section 475 (A 603/84) which reads:
(i) Any person desirous of having a boat licence shall apply to the Port Officer of the nearest port, who shall examine the boat, and, if he thinks it seaworthy and proper for the purpose for which licence is applied, may cause the boat to be licensed for such purpose; and
(ii) The Port Officer may by endorsement on the licence of a licensed cargo boat, licence the boat to carry, when empty of cargo, such number of passengers as he thinks fit, and


in that case it shall not be necessary for such licensed cargo boat to be separately licensed as a passenger boat. (c) any local fishing vessel not exceeding 500 tonnes gross where such vessel is licensed under any written law relating to fisheries (A603/84). Before registration, the owner of every Malaysian ship shall be surveyed and measured by a Surveyor of Ships and the tonnage to be ascertained in accordance with the provisions of regulation. The Surveyor of Ships shall grant a certificate specifYing the ship’s tonnage and build and other descriptions of the ship. Environment Quality Act 1974 (“EQA”) EQA is established for the prevention, abatement, control of pollution and enhancement of the environment. EQA is required for the prohibition and control of pollution of the atmosphere, soil, inland waters and seas. With the enforcement by Department of Environment Malaysia, there are various provisions to environmental quality, including water, atmosphere, noise, soil, waste treatment and disposal services, sewage and industrial effluents and other environmental issues. Sub-section 27 of EQA, Prohibition of Discharge of Oil into Malaysian Waters reads that no person shall, unless licensed, discharge or spill any oil or mixture containing oil into Malaysian waters, whilst sub-section 29 of EQA, Prohibition of Discharge of Wastes into Malaysian Waters reads that no person shall, unless licensed, discharge environmentally hazardous substances, pollutants or wastes into the Malaysian waters. Any person who contravenes sub-section 27 or 29 shall be guilty of an offence and shall be liable to a fine not exceeding RM5,OOO or to imprisonment not exceeding five (5) years or both. 10. INDUSTRY OVERVIEW (Cont’tlj 10.9.3 Incentives Incentives for Approved Service Projects (“ASPs”) ASPs or projects in the transportation, communications and utilities sub-sectors approved by the Minister of Finance qualifY for the following tax incentives: (a) Main Incentives for ASPs (i) Exemption under Section 127 of the Income Tax Act 1967 Generally, under Section 127 of the Income Tax Act 1967, companies undertaking ASPs can apply for a tax exemption of 70% of their statutory income for five (5) years. However, companies undertaking ASPs in Sabah, Sarawak and the designated “Eastern Corridor” of Peninsular Malaysia are eligible for a tax exemption of 85% of their statutory income for five (5) years, while companies undertaking ASPs of national and strategic importance are eligible for a 100% tax exemption of their statutory income for ten (10) years. (ii) Investment Allowance (“IA”) under Schedule 7B of the Income Tax Act 1967 The Investment Allowance (IA) under Schedule 7B of the Income Tax Act 1967 is an alternative to the incentive offered under Section 127. Generally, under IA, companies undertaking ASPs are eligible for an allowance amounting to 60% of the qualifYing capital expenditure incurred within five (5) years from the date the first capital expenditure is incurred. The allowance can be offset against 70% of the statutory income and any unutilised allowance can be carried forward to subsequent years until fully utilised. However, companies undertaking ASPs in Sabah, Sarawak and the designated “Eastern Corridor” of Peninsular Malaysia, are eligible for an allowance of 80% on the qualifying expenditure which can be offset against 85% of the statutory income. Companies undertaking ASPs of national and strategic importance will be granted an allowance of 100% on the qualifYing capital expenditure incurred within five (5) years. This allowance can be offset against 100% of the statutory income. (b) Additional Incentives for ASPs Companies undertaking ASPs will enjoy exemptions from Import Duty, Sales Tax and Excise Duty on raw materials, components, machineries, equipment, spares and consumables. Imports of raw materials and components not available locally and used directly to implement ASPs are eligible for exemption from import duty and sales tax, while locally purchased machinery or equipment are eligible for exemption from sales tax and excise duty. Companies providing services in the transportation and telecommunications sectors, power plants and port operators can apply for import duty and sale tax exemption on spares and consumables that are not produced locally. 11. BUSINESS J1.1 Overview Our Company was incorporated as a public limited company in Malaysia under the Act on 23 JW1e 2005. As at the date of this Prospectus, we have an authorised share capital of RM250,000,000 comprising 500,000,000 Shares whilst our issued and paid-up share capital is RM66,558,441 comprising 133,116,882 Shares. Our Group structure comprises an investment holding company, five (5) subsidiaries and one (I) associated company as illustrated below:
Our Group’s business commenced in 1998 when AMSB first started its operations. In the early years, AMSB prOVided charter services by chartering third party vessels to transport its customers’ goods and supplies. Given the significant advantage of owning its own vessels, AMSB acquired its first vessel in 1999. Since then, AMSB began establishing itself as an owner of offshore support services servicing predominantly companies operating in the Malaysian oil and gas industry, whilst at the same time developing its chartering and brokerage skills by acting as manager or operator for third party vcssels. Currently, we own fifteen (15) vessels which are all Malaysian-flagged and are in the midst of commissioning another one (I) new vcssel scheduled for delivery in July 2006. In addition, we are also planning to utilise part of the proceeds from our IPO to acquire four (4) vessels at the end of 2006 or in 2007. The expansion in our fleet of vessels over the years and in the future is part of our fleet expansion strategy, which we expect will further develop and enhance our operations and business. Please refer to Sections 11.8, 4.11 and 11.3 of this Prospectus for further details on our vessels, our proposed utilisation of proceeds from our !PO and our business strategy respectively. JJ. BUSINESS (Cont’d) As our operations expanded. our subsidiaries were incorporated to venture and specialise into specific areas related to the marine support services such as underwater services, ship owners and! or ship managers. Currently, our Group’s business activities can be divided into two (2) divisions as illustrated below: II ( Our Group I I r=.==.=..:::::1.1====—… . Offshore Facilities Offshore Support vessel~= I Construction and Installation [I Services I and Underwater Services (i) Offshore Support Vessels and Services. We provide our own vessels for charter as well as identirying suitable third party vessels based on our customers’ needs and requirements, chartering the identified vessels from third parties and re-chartering them to our customers. We also provide various types of services to our customers such as assisting seismic operators in seismic survey related activities to locate oil and gas reserves in ocean beds; transportation of crew, supplies and cargoes to and from shore to rigs, platfonns, offshore facilities or vessels; towing and mooring of rigs offshore; anchor­handling services; providing stand-by duties such as fire-fighting duties for offshore fires and anti-pollution and preventive measures to react to oil slicks; and other support! repair and maintenance services such as pipe and cable laying, plalfonn commissioning andJ or decommissioning. Please refer to Section 11.5 of this Prospectus for further details on the provision of offshore support vessels and services. (ii) Offshore Facilities Construction and Installation and Vndenvate. Services. We provide offshore facilities construction and installation services such as marine construction related services; sub-sea engineering services; and offshore pipeline construction related services. We also provide OUT equipment such as saturation diving system and air diving system for rental to our customers. Please refer to Section 11.6 of this Prospectus for further details on the provision of offshore facilities construction and installation and underwater services. 11. BUSINESS (Cont’d) 11.2 Competitive Strengths We believe our principal strengths are as follows: (i) Experienced, technically sound and dedicated management team We have an experienced, technically sound and dedicated management team which is led by our founders who are also our Directors, namely Azmi bin Ahmad (Managing Director), Mohd Abdul Rahman bin Hashim (Technical and Operation Director), Shaharuddin bin Wamo @ Rahmad (Finance Director) and Ab. Razak bin Hashim (Project Director). Collectively, our management team have vast working experience and in-depth knowledge of the corporate and connnercial working environment, in general, and specifically, of the offshore support services industry in Malaysia as well as extensive experience operating in the Asia Pacific region. OUf management’s team experience and knowledge have been the key factors in the development and performance of our Group and has enabled our Group to tap the opportunities available in this region and beyond. (ii) Young fleet ofvessels As at the Latest Practicable Date, we own a total of fifteen (15) vessels. The fleet of vessels owned by us is generally young with four (4) of them aged below seven (7) years whilst another seven (7) are newly built vessels. The rest of the vessels that are not as new had undergone their scheduled periodical maintenance and inspections to ensure their seaworthiness. Our Group have entered into contracts to receive delivery of two (2) new vessels in 2006 to further expand our fleet size. We have received delivery of one (I) of these two (2) vessels in March 2006 and expect to receive delivery of the other vessel in July 2006. We are also planning to utilise part of the proceeds from our IPO to acquire four (4) vessels at the end of2006 or in 2007. All of our newer vessels are designed, built, powered and fitted with up-to-date technology and equipment to provide us with the flexibility to meet the changing needs of our customers. OUf newer vessels, also enhance our ability to mobilise and deploy our vessels to other parts of the world with harsher environment as we explore further into deeper waters. (iii) (iii) Established track record, good business network and strong customer relationships Our Group has been involved in the offshore support services industry since 1998. Owing to our quality service and reliability, our Group has established a good track record which provides us with the edge in retaining our present pool of customers as well as attracting new customers. Over the years, our Group has also established good rapport and business network with our customers, attained through our quality service and reliability as well as the hands-on involvement of our key technical personnel, in particular the founders of our Group who have collectively more than fifty (50) years of experience in the shipping and offshore support services industry. The business network established has also enabled us to secure new businesses. The awards which we have received from our customers which include amongst others, Certificate of Achievement for no loss of man-hours, Contractor Safety Award and Excellent HSE Perfonmance “Gold Award”, are reflective of the quality and reliability of our services, in particular due to our good and sound health and safety management. Please refer to Section 11.12 of this Prospectus for further details of the awards that we have received. ) I. BUSINESS (Cont’d) 11.3 Strategies Our key objectives are to maintain and leverage on our existing strengths, grow and improve our business, and ultimately create value for our shareholders. In light of the present outlook and future prospects of the industry as set forth in more detail in Section 10 of this prospectus, we intend to implement the following key strategies to achieve our key objectives: (i) Fleet Expansion As our business continues to expand and in order to provide better quality services, we plan to expand our fleet size and to maintain a young fleet equipped with the latest technology and capabilities. Between 2003 and 2005 (both years inclusive), we have acquired and reeeived delivery of ten (10) sizeable vessels with an investment value of approximately RM277 million, the latest being the six (6) new vessels received and commissioned in 2005, with an investment value of approximately RMI70 million. Out of these ten (10) newly acquired vessels, one (I) has an engine capacity in excess of 8,900 BHP whilst seven (7) others have engine capacities of between 4,750 BHP -5,150 BHP. The other two (2) vessels have engine capacities of between 3,000 BHP -3,200 BHP. In addition, we have received the delivery of one (I) new vessel in March 2006 and we are expecting the delivery of another new vessel in July 2006. Both these vessels have engine capacity of 5,I50 BHP each, and the investment in these two (2) new vessels is approximately RM70 million. Moving forward, we are also in the process of identifYing another four (4) suitable vessels which we hope to acquire at the end of the year 2006 or in 2007 by utilising part of the proceeds from our IPO. These vessels have the capabilities to perform various services, amongst others: • Transport supplies such as fuel oil, fresh water, drill water, liquid mud, base oil. brine, materials and equipment; • Anchor handling and towing duties; and
• Transport offshore personnelJ project materials from marine supply base to offshore platform.

With an expanded neet size, our Group hopes to reduce reliance on third party vessels. Concurrently, our expanded neet size, comprising predominantly of vessels with higher engine capacities, will be able to secure higher yielding contracts that would contribute to a steady and recurring revenue stream. Our fleet cxpansion strategy is also in tandem with our plan for market expansion which is to tap on opportunities in another geological region. (ii) Market Expansion In view of the vast opportunity available in the Middle East region which accounts for approximately 65% of the world crude oil reserves, our Group has started making inroads into the said region as part of its strategies to widen the customer base. To establish our presence in the Middle East region, our Group, together with third parties, has set up an operation in Dubai, UAE in May 2005. This marked our Group’s first foray 10 penetrate the Middle East region. Through this establishment, we have successfully secured two (2) contracts worth approximately RM28 million with one of the petroleum companies in Qatar. 11. BUSINESS (Cont’d) Apart from our expansion into the Middle East, we have also, successfully secured a two (2)-year contract with an estimated value of RM13 million to provide mooring and urunooring of tankers and hose handling services to a petroleum company in Indonesia, which commenced in November 2004. We will continue our market expansion plan in the Middle East and South East Asian regions with the possibility of penetrating the South African market in the near future. (iii) Vertical Expansion Our Group envisaged that there will be growing demands for offshore facilities construction and installation and undenvater services as Petronas is expected to gradually increase production in the next five (5) years, a move which will in turn translate into potential increase in opportunities in relation to installation and maintenance works. Moving in tandem with the oil and gas industry growth, we aim to become an integrated offshore support services company that is capable in providing a diverse range of offshore facilities construction and installation and underwater services such as installation, inspection and engineering services. In 2004, our Group acquired a saturation diving system which allows our dive team to venture into deep water diving (between 50 to 200 metres) operations. Total investment incurred for this system is approximately RM7 million. This system allows 24-hour operation and improves the efficiency of divers, and subsequently provides cost efficiencies for our customers. Moving forward, our Group is currently in the midst of acquiring and commissioning a new ROY by third quarter of 2006. ROV is a robotic underwater vehicle used to carty out underwater observation and inspection activities in lieu of divers and is also the latest technology that allows underwater surveys to be carried out and samples to be collected beyond the continental shelf. The saturation diving system has already generated significant returns for us in 2004 and 2005 and we expect a continuation of this in the future. Likewise, our new ROY is expected to contribute positively to our earnings in 2006 and future years. Our Group intends to further expand our diving services in the future. In this respect, we are constantly on the lookout for opportunities and will evaluate and consider the acquisition of additional diving system and other underwater equipment as and when these opportunities arise. Our Group is also actively seeking opportunities in the area of providing offshore installation services to the oil and gas operators. Generally, installation works comprise installation of platform, underwater pipelines and offshore facilities. There are many challenges to be encountered during the provision of such works and services. A critical component in overcoming these challenges is technical knowledge and in this respect, our Group has the capabilities of performing such tasks as evidenced by the attainment of the relevant licence(s) from Petronas to provide services such as maintenance and repairs of pipelines and sub-sea structures, underwater engineering, construction and maintenance services. 11. BUSINESS (Conl’d) 11.4 Services Our services are primarily categorised into two (2) main areas, namely (i) Offshore Support Vessels and Services and (ii) Offshore Facilities Constructions and Installations and Underwater Services. Our Group also derive a very small percentage of revenue from other business activities that relate to marine support services on an ad-hoc basis. The breakdown of our Group’s revenue by activity for the financial years ended 31 December 2003, 2004 and 2005 respectively, are set forth below: For the financial year ended ___-:::-:-:2;:-;0:-.::03:,-2004 =:–0:-2°:,-:°:::-5 RM 000 RM 000 RM 000 Offshore Support Vessels and Services 94,591 116,759 129,251 Underwater Services 133 3,551 7,868 Others ______~ _=5_=_6 6c..:1_=_9 Total ____.:..94,;,:,,;,.:72:.;,.4 –:1.:.20:.;,3.:..6:.;,.6 …..::13;,,;7.:.;,7.:.38:.. Based on an independent market report issued by Infocredit D&B, the market size for the offshore support vessels and services industry in Malaysia is approximately RMI billion in 2004. Accordingly, based on our Group’s revenue generated in 2004, we garnered approximately 12% of the market share in relation to the provision of offshore support vessels and services to the oil and gas industry in Malaysia. 11.5 Provision of Offshore Support Vessels and Services Our Group provides offshore support vessels and services to the upstream activities of the oil and gas industry. We own an operationally ready fleet of support and service vessels, which can provide offshore services as set forth in the table below: Offshore Support Description Services
Seismic survey Supporting seismic operators in seismic surveys. Seismic surveys are carried activities out by or on behalf of oil and gas companies to locate oil and gas natural reserves in ocean beds. Our Group’s vessels are designed to support seismic survey activities. Transportation of Transporting personnel and food provisions from platform to platform as well crew and supplies as to and from shore to rigs, platforms or vessels. Towing and mooring Towing rigs and mooring them offshore to the exact locations of the given co­of rigs ordinates. Anchor handling Setting anchor for the rigs/derrick barges at offshore locations. Transportation of Transport bulk cargoes from marine supply bases to offshore facilities. cargoes and supplies Diving/ROY support Provision of maintenance services via the utilisation of ROV and diving services Support services I Support derrick/pipe-laying barge, cable-laying vessels and maintenance of repair and offshore support facilities. maintenance I I. BUSINESS (Conl’d) (i) Seismic survey operations The utility vessels are commonly used to support the survey activities. Amongst the tasks to be performed by these vessels are fisb trap survey, tagging and scouting. Before the actual survey is carried out; the area needs to be cleared from debris such as fish traps, fisherman net and so on. During the survey, the survey equipment which is deployed in the water needs to be protected. The scouting and chasing task is to ensure that no boats will damage the lines. The utility vessels are normally chartered by seismic companies like Petronas Research to carry out survey and soil sampling. (ti) Transportation of crew and suppties SSVs are used for supplying goods, equipment and food provisions to the oil rig and platform and as a general purpose vessel to carry out repair and maintenance of the oil rig and platform. The features of the SSV are its long platform deck to carry equipmcnts or winches to support the oil rig and platform. SSYs are also used to transport personnel and necessities inter-rig and inter-platform as well as to and from shore to rigs, platforms or vessels. (iii) Towing and mooring of rigs An exploration rig will be hired and towed into the defined precise location. Jt will then be positioned either through legs or anchored, depending on the water depth. The towing and moving of rigs from one location to another are handled by AHTS vessels. These vessels are equipped with winches capable of towing drilling rigs, lifting and positioning their anchors and other marine equipment. The AHTS vessels range in size and capacity and are usually characterized in terms of horsepower and towing capacity. For the Malaysia service, AHTS vessels typically require between 4,500 horsepower or more to position and service drilling rigs in deep water areas. (iv) Anchor handling As mentioned above, the AHTS vessels are used in positioning anchors and other marine equipment. These vessels are equipped with a winch and a total engine power of 4,500 horsepower or more and are used for anchor handling activities. Apart from sct1ing anchor, these vessels can additionally be used as SSVs/tugboats. (v) Transportation of cargoes The SSYs serve to support the exploration and production as well as offshore and maintenance work. These vessels are used in the carriage of cargoes and equipment from supply base to offshore facilities. The deck load offer capabilities to transport large and long cargoes such as pipes. In addition to deck cargo, such as pipe or drummed materials on pallets, SSVs also transport liquid mud, potable and drill water, diesel fuel and dry bulk cement. (vi) DivingIROY support activities Old and new platforms need to be maintained on regular basis. The maintenance of the structures can be above or underwater. For this purpose we employ DSV and at the same time provide diving services. The main purpose of DSV is to provide platform for divers in performing underwater task. These vessels can accommodate up to 40 to 100 persons at any one time. Big crane may be one of the equipment required for the operation on the DSV. These vessels more often are also equipped with saturation diving system which enables divers to dive from 25 m to 200 m. The ROV operation may also be conducted on board of these vessels. In addition to this, these vessels are also capable of providing standby duties such as carrying out fire-fighting duties and anti-pollution and prevention measures to react to oil slicks and offshore fires. 11. BUSINESS (Conl’d) (vii) Support services! repair and mainteuance Large fields are likely to be provided with platfonns piled into the seabed with pipelines to some suitable point on the main land. One of our support services provided is to assist in pipe-laying. Repair and maintenance services are also provided for both old and new platfonns on a regular basis. The maintenance of the structures can be above or underwater. 11.6 Provision or Offshore Facilities Constructions and Installations and Underwater Services As part of the strategy to vertically integrate the Group’s operations, our Group has ventured into the provision of offshore facilities construction and installation and underwater services. These services are carried out through AHSB. AHSB is a registered member of the Association of Diving Contractors International, USA. With its established network and experiences coupled with its range of equipment, AHSB is able to provide the following offshore facilities construction and installation and underwater services to its existing/potential customers in the oil and gas industry: Services Description (i) UndefVI!aterservices(ii) Offshoreconstruction andinstallation andrelated services(iii) Sub seaengineering services(iv) Offshore pipelineconstruction andinstallation and related services Saturation set diving Surface air diving Surface mix gas Offshore / onshore underwater construction Underwater video and photography Underwater welding and cutting Water blasting I hull cleaning Underwater painting Maintenance and cleanjng of seawater intake structures Submarine pipeline and cable laying Civil and marine engineering inspections Non-destructive testing Salvage ROY inspection Offshore pipeline and structural installation works Telecommunication and power cable installation Offshore platfonn and pipeline abandonment and decommissioning Pipeline End Manifolds and Single Buoy Mooring installations Underwater Inspection In Lieu of Dl)’docking (“UWILD”) for DNV and ASS Underwater inspection Repair and maintenance ofoffshore platforms and sub sea pipelines (both air and saturation diving) Port jetties and wharves Cooling water intakes for refinery, petrochemical and power plants as well as marine and artefacts salvage Coffer dam construction Pipeline installation including Horizontal Directional Drilling, pipe-jacking and hot-tapping 11. BUSINESS (Conl’d) 11.7 Operational Process Our involvement in providing marine transportation services and underwater services occur at various stages of the oil and gas exploration and production activities, from seismic exploration in virgin seabed to the final production of oil from offshore installation in brown fields as well as the decommissioning of pipelines and platforms. Twelve (12) of our Group’s fifteen (IS) vessels are at present being deployed domestically, covering offshore activities both in West and East Malaysia. On the West Malaysia side, these vessels are mainly operating from the Kemarnan Supply Base, Terengganu to suppon the E&P activities in the high seas of Terengganu, providing offshore marine suppon services to oil majors that are operating in concession blocks such as PM-3 CAA by Talisman, PM-9 by Petronas Carigali, and PMS and PM8 by Exxon Mobil. On the East Malaysia side, the operations are carried out from the Asia Supply Base, Labuan. Currently, we provide marine suppon services mostly to oil majors operating in concession blocks such as Blocks 309, 311, P and H by Murphy, and Blocks 30I, 302, 306 and 307 by Petronas Carigali Sdn Bhd. Apart from domestic deployments, our Group also operates in overseas venture. We have successfully opcrated in Russian waters in 2005 and at present, we are operating in offshore Middle East and Indonesia. Two (2) of the Group’s vessels are operating in Qatar servicing RasGas whilst one (I) vessel is currently servicing ConocoPhilips at the Natuna Field in Indonesia. We have also in 2004 and 2005 successfully mobilised our underwater facilities and equipment to operate in Thailand, India, Japan and Australia. Currently, are preparing the equipment for our next job in Indonesia. [The rest ofthis page is left blank] 11. BUSINESS (Conl’d) Our daily operation ofvessel(s) process is illustrated in the diagram below: Operational Overview  1.  Project Department Sends  Inst ructions to Mobilise Vessel(s)  I  ‘I’  ‘I’  2a. OWN VESSEL(S)  2b . OTHER SHIPOWNER’S VESs;~(~)l  Preparation ofVesse1(s)  Send Instructions to Prepare Vessel(s)
I …. 3. Mobilise Vessel(s) :….  … 4a. OPERATION DEPARTMENT I i. Daily Report -Vessel(s) Movemenii. Planned Maintenance  t! I  ‘I’ 4b. TECHNICAL DEPARTMENT i. Daily Report -Vessel(s) R.O.B ii. Planned Maintenance  I  :<///OK?’~””-…””  Yes  1————–“—–.
. _ ——–~ Sa. Record Keeping /. . “-”—-//// No i ‘1’.._. . __ ~——-­5b. OWN VESSEL(S) 5c. OTHER SHIPOWNER’S i. Identify the Problem VESSEL(S) ii. Rectification Process in Instruct Shipowner to Identify and Accordance with SMS Procedure Rectify Problem 6b. Inform Client of Down i Time and Rectify Vessel(s) IL :~~~_~::_p_ro_V1_·~~~ _
II. BUSINESS (Conl’d) Noles:  1.  Project Department sends instructions to mobilise vessel(s) Once our Group receives the Letter of Award from our client, the Project Department would send out instructions to the Operation and Technical Departments to mobilise the vessel(s) chosen, at the specific time period stated in the tender.  2a.  Own vessel(s) If the vessel(s) is owned by us, the Project Department would prepare the vessel(s) and check that all mandatory criteria set out in the tender are met. If required, the vessel(s) would be sent to the shipyard to undergo the necessary modifications. This would be conducted as per the mobilisation plan in the tender documents.  2b.  Other shipowner’s vesseJ(s) If the vessel(s) is not owned by us, the Operation and Technical Departments would send instructions to the vessel(s)’ shipowner to prepare the vessel(s) as per all mandato!)’ criteria set out in the tender.  3.  Mobilise vessel(s) Once all criteria are met, the vessel(s) would be mobilised to the location set out in the tender.  43.  Operation Department The Operation Department would be responsible for preparing daily reports on the vessel(s)’ movement and ensuring that the vessel(s) is maintained as per its planned maintenance schedule.  4b.  Technical Department Meanwhile, the Technical Department would be responsible for preparing daily reports on the items remaining on board (“R.O.B”) of the vessel(s), including water and petrol. Similar to the Operation Department, the Technical Department would also ensure that the vessel(s) undergo its planned maintenance.  Sa.  Record keeping If there are no problems, both the Operation and Technical Departments would keep daily reports on the movement of the vessel(s) and vessel(s)’ R.O.B respectively.  Sb.  Own vessel(s) However, ifa problem is discovered, the Operation and Technical Departments would be responsible for identifying and rectifying the problem in accordance with the Safety Management System (“SMS”) procedure.  5c.  Other shipowner’s vessel(s) If a problem is discovered on the vessel(s) owned by another shipowner, the Operation and Technical Departments would send instructions to the shipowner to identify and rectify the problem.  6a.  Record keeping Once the problem is rectified, the Operation and Technical Department would keep a record of the rectification.  6b.  Inform client of down time and rectify vessel(s) within days provided However, if the problem cannot be rectified immediately, the Operation and Technical Department would inform the client of the down time and rectifY the vessel(s) owned by our Group within the days provided. Vessel(s) owned by another shipowner, would be rectified by its own owner.  6c.  Inform Project Department to source for vcssel(s) replacement If the vessel(s)’ problem cannot be rectified, the Operation and Technical Department would inform the Project Department, which is responsible for finding a replacement vessel(s).
ICompany No.: 700849-K I 11. BUSINESS (Conl’d) B.S Our Vessels 11.8.1 Our existing vessels as at 31 December 2005 Set-forth below are the details of the fourteen (14) vessels that we own as at31 December 2005: Vessel  Ilcgistcrcd owner  Description by function  Registration  Classification  Year of constructionl acquisition  Horse power (8HP)  NT/ GRT/ DWT (MT)  NBVas at 31 December 2005 (RM 000)  Market value(l) (RM 000)  Surplus (il) (RM 000)  MV Selia Abadi (1J.lIII)  AMSB  UV/ SV/ General Purpose Vessel  Malaysia  DNV  1980/ 1999  1,040  76/ 254/ 150  173  750  577  MV Setia Bakti (IWU)  AESB  PSV/ Towing Vessell SSV  Malaysia  ABS  1982/ 2001  3,000  286/ 955/ 1,226  2,511  4,000  1.489  MV Setia Cekal (i),tlll)  AMSB  DSV/ Four (4) point mooring  Malaysia  SCM  1975 (rebuilt 1996)/ 2002  4,400  299/ 994/ 750  7,902  9,500  1,598  MV Selia Damai (1},(Iff)  AMSB  UVI SV/ Buoy Maintenance Vessel  Malaysia  SCM  1985/ 2002  804  83/ 278/ 150  275  850  575  MV Selia Gagah (I).{M  AMSB  PSV/ SSV/ Towing Vessel  Malaysia  ABS  20021 2003  4,750  3561 1, 1881 860  19,258  25,000  5,742  MV Selia Handal (fUM  AMSB  PSVI SSV  Malaysia  ABS  20021 2003  3.000  204/1 6811 390  12,556  19,000  6,444  MY Selia Jaguh (1),(1.,)  AMSB  AHTS  Malaysia  BV  19991 2003  8,920  6091 2.0321 1,800  42,955  46,000  3,045  183
11, BUSINESS (Colll’d) Vessel  Registered owner  Description by fum:tion  Registration  Classification  Year of constructionl acquisition  Horse power (BHP)  NTI GRTI DWl’ (MT)  NBV.s at 31 December 2005 (RM 000)  Market “sluew (RM 000)  Surplus (iI) (RM 000)  MY Selia Emas (fUM  AMSB  AHTI Tenninall Multipurpose Tug  Malaysia  BV  20041 2004  4,750  2891 9641 750  24,212  27,000  2,788  MY Setia Fajar (iY)  AMLI  AHTS  Malaysia  BV  20041 2005  5,150  4411 1,4701 1,250  31,630  MV Selia Indah (i”J  AMLI  PSVI SSV  Malaysia  BV  20051 2005  4,750  4011 1,2001 1,158  28,774  MV Sefia Lestari (;’1)  AMSB  AHTS  Malaysia  BV  20051 2005  4,750  441/ 1,4701 1,250  32,009  MY Setia Nurani (ilT)  AMSB  AHTS  Malaysia  ABS  20041 2005  5,150  4571 1,5231 1,350  36,905  MV Setia Kasturi (iv). (v)  AMLI  PSVI SSVI  Malaysia  ABS  20051 2005  4,750  4791 1,4501 1,150  25,460″‘)  MY Setia Mega (iy). M  AMLI  AHTI UV  Malaysia  NKK  20031 2005  3,200  1491 4961 307  13,300′”
Notes: r;; In relation to our [PO, a valuafi011 ofthe eight (8) vessels which we owned as of 31 December 2004 was conducted by a registered independent valucr, Messrs. Raine & Horne {nterna/ional Z(lki + Partners Sdn Bhd. The ~aluations o/tlte vessels have been approved by the SC forthepurpose ofourJPo. P/easftrefertoSection 16 ojthisProspectusforfurtherinformationon the valuation afthese vessels. (ii) The surplus represents the difference between the mar/WI value and the nef book va/rle a/the vessel as at 31 December 2005 (before adjusting/or deferred lax and minority interest ‘$ shure oflhe difference between the market I’olue and the flel boole. vallie ofthe vessel as at 3/ December 200S). 184 ICompany No.: 700849-K I II. BUSINESS (Conl’d) (iii) As at the Lares( Praclicable Dale. the vessel is free from any encumbrances. (iv) As af the La/est Practicable Dlite, the vessel is held as coiJateral by thefillancierfor thefinancingfacj/iry provided to our Group 10 acquire the respec:rive vf!ssd
(v) We received delivery ofthe ves.~e’s (OlVarar Iheend oftheyear2005. ThefillQncingtoacquirevesselswereonlyfinalised in2006. Thevaluedisclosedrepresentsthecosl ofthevessels.

11.8.2 Our new vessels in 2006 In addition to our existing vessels, we have taken delivery of one (1) new vessel for the period up to the Latest Practicable Date, with one (I) more vessel due to be delivered in July 2006. The details of the two (2) new vessels are set forth below: Year of NT! Registered constructionl Horse GRTI Vessel owner Description Registration Classifit’8tion ~uisition power DWT Cost of vessel (BHP) (MT) (RM 000) MY Selia Padu (i). (iii) AMLI AHTS Malaysia BY 20061 5.150 4501 34,770 2006 1,500/ 1.350 MV Selia Rentas (Ii) AMLI AHTS Malaysia BY 20061 5,150 4501 34,770 2006 1,5001 1,350 Notes: (i) We hOlle received delivery ofthe vessel in March 2006.
(ii) As at the Latest Practicable Date, the ve.~sel i.~ still in the proce~’s ofbeing (;ummissioned and we expect delivery f?f fhe vessel in mid 2006. The registration. clas,~ificQtion, NT, CRT and nWT will only befinalL~ed upon completion ofthe com’/ruction o/the vessel. Similarly, the financing facility jar the vessel will only be executed on or ahout the point ofdelivery a/the ve.~.~e’, The regis/ration and classification oft/If] vessel are based on Management’s intention whilst the NT, CRT and DWT are based on Management’s compu/ation and estimates based upon the blue print and design afthe vessel.

(iii] As at the Latest Practicable Date. the vessel is held as collateral by thejilloncier for thefinancingfacility provided /0 our Group to acquire the re,~pective vessel, 185 11. BUSINESS (Conl’d) 11.9 Process Flow of Chartering Vessels Set out below is our typical process flow chart ofchartering vessels: 1. Notice of Tender Invitation
2. Evaluation “and Review of Tender Requirement

I 3a. Decline and”Submission of 3b. Submission”of Intention to Decline Letter Participate __I L__ t_r——-“——~ , 4b. Other Shipowner’s Vessel4a. Own Vessel II -Obtain Proposal and , -Indicate Suitable Vessel for Quotation from Other Proposal Shipowner -”
5. Preparation of Tender Bid Proposal and Documents
6. Final Review of Technical and Commercial Proposals
7. Management” Review and Signatory of Tender Documents

y -‘–, 8. Submission of Tender Documents Notes: 1. Notice of tender invitation Tender invitations are issued to Ship Owners/ Operators in the bidders’ list provided by Petronas Licensing Department, based on vessel categories registered under the Petronas Licence.
2. Evaluation and review of tender requirement Upon receipt of the tender documents, the management of our Group would evaluate and review the tender requirements and decide if we will participate in the tender.

Our Group would then confinn receipt of the tender documents by completing a tender acknowledgement and forwarding it within seven (7) days via telex, fax or by hand delivery to the company that issued the tender invitation. 3a. Decline and submission of decline letter Should the management decide not to submit a tender, our Group would need to provide valid reasons in the tender acknowledgement and return this tender acknowledgment to the company that issued the tender invitation. 11. BUSINESS (Cont’d) 3b.  Submission of intention to participate If the management decides to participate in the tender, OUf Group would indicate its intention to submit a tender within the tender acknowledgement. This tender acknowledgement would then be returned to the company that issued the tender invitation (“potential client”).  4a.  Indicate suitable vessel for proposal Tenderers are allowed to propose more than one (1) vessel. this vessel meets the criteria set by the potential client.  Our Group may propose its own vessel if  4b.  Obtain proposal and quotation from other shipowner On the other hand, if our vessels do not meet the criteria in the tender invitation, we would obtain a proposal and quotation from another shipowner. Once a suitable vessel is found, a letter of authorisation would be obtained from the vessel’s shipowner and submitted together with the tender.  5.  Preparation of tender bid proposal and documents A tender bid proposal and documents would then be prepared according to instructions provided in the tender invitation. A tender usually encompasses technical and commercial bid proposals. lnfonnation contained in these proposals is set forth in the table below:
Information Pro osal
Description Required Technical Commercial Fonn of Registered address of our Group and signature of tender letter its principal officer, including hislher full name and position. Schedules of Rates quotation as per instructions provided in the prices and tender invitation. May include daily charter rate, rates mobilisation and demobilisation fee as well as messing rates (e.g. for meal and laundry expenses). Qualifications Prices only, if Technical Proposal: to tender and Should not contain any details on prices. To contract any indicate if there are any qualifications. If yes, conditions details on the qualifications, alternative wordings and reasons why we cannot comply with any ; requirements stated in the tender invitation are provided.
Commercial Proposal: Contain any qualifications that may have commercial (i.e. price) impacts! aspects.
Proposed Prices only, if Technical Proposal: alternatives To indicate if there are any proposed alternative(s) that will improve the services required by the JX)tential client. If yes, precise details on original requirement(s), proJX)sed alternative(s) and reasons for the proposed alternative(s) are provided. any Commercial Proposal: To indicate if there are any proposed alternative(s) that will reduce the rates and prices. Ifyes, details on price impact are provided.
11. BUSINESS (Conl’d) Information Pro osal Description Required Technical Commercial Specifications Vessel(s)’ classification (e.g. ABS, DNV, etc.), oftenderer’s !icence, auxiliaries (i.e. generators), performance proposed (Le. speed), propulsion, deck fittings and vessel(s) equipment, deck space and safety, amongst others. Delivery date of the vessel(s). Vessel(s) chosen must be available to commence services at the specific period stated in the tender invitation. Letter of authorisation from shipowner, if the vessel(s) is not owned by our Group. To complete a questionnaire that contains criteria mandatory Summary of that must be complied in fulL Failure to comply criteria with any of the mandatory criteria would result in the disqualification of the tender bid. Examples of criteria that must be met are vessel(s) availability during required service period, vessel(s) classification, auxiliaries and performance. General arrangement plan and photographs of the proposed vessel(s). Drawings Resumes of Names, functions and full curriculum vitae of all personnel key personnel that will be involved in the vessel(s) operation. The curriculum vitae would include relevant personal information, full work history, experience and levels of responsibility held to date. Tenderer’s In the event that the offered vessel(s) requires mobilisation modification, a programme endorsed by our plan Group’s proposed shipyard would be submitted. The programme would include the various stages of modification of the proposed vessel(s) on a time plan basis. Tenderer’s Details on past experiences in executing works of relevant similar nature, which may include name of experience contracts, description of work performed, contract with similar start date and duration, client, total value of projects contract and name of referees for each contract. Bid panel
To complete a questionnaire set by the bid panel. questionnaire Information required are details on our Group, including address, shareholders, capital. loan repayment as well as equipment owned or leased, amongst others. Financial Evidence of our Group’s credit worthiness and infonnation financial soundness, including a banker’s reference relating to the tender invitation and certified copies of our Group’s audited accounts
(i.e. financial statement, profit and loss account and letter ofcredit worthiness from banker). 11. BUSINESS (Cont’d) Information  Pro  osaI  Description Sample copy of daily. weekly, fortnightly,  Required  Technical  Commercial  Vessel’s  .,  maintenance  monthly. quarter-yearly, half (Y,)·yearly and two  schedule  (2)·yearly maintenance programme for the proposed vessel(s) and all equipment and machinery on board.  Contractor  .J  To complete a health, safety and environmental  safety  evaluation questionnaire and provide additional  assessment  infonnation where necessary. Example. if our  questionnaire  Group answers “Yes” to having a Health, Safety and Environmental policy statement, then it needs to attach a copy of this policy statement for the potential client’s review.
6. Final review oftecbnical and commercial proposals A final review of both the technical and commercial proposals would be conducted to ensure that they contain full responses to questions and requirements set in the tender invitation. Furthermore, the technical proposal would be checked to ensure that it does not contain any pricing or other statements of cost impact. Should prices or rates be quoted in the technical proposal, the tender submission may be disqualified. 7. Management review and signatory of tender documents Once both technical and commercial proposals have gone through a final review, the management would review and sign on the tender documents.
8. Submission of tender documents These documents would then be submitted to the client by post, courier service or delivered by hand, before the closing date and time stated in the letter of invitation to tender. Successful bidder would receive Letter of Award by client after technical and commercial evaluation of all proposals.

1I.10 Licenses and Certifications We have complied witih the conditions of all licenses and approvals applicable to us. We believe that our licenses and approvals are in good standing and expect to be able to fulfil our licenses and approval terms to the satisfaction of the relevant authorities. We are required to renew such licenses and approvals from time to time and may be required by our c1ienls to apply for additional licenses and approvals. While we believe that we will be able to renew our licenses and approvals, tihere can be no assurance that the relevant authorities/ parties will issue such licenses within the time frame required, or at all, the failure of which may adversely affect our business and results ofoperations. 11. BUSINESS (Conl’d) 11.10.1 Licenses Approved by Petronas Our Group currently holds a Petronas licence (license no.: L-394243-P) under the code and category as set forth in the table below: Code Approved Licence Categories L SM3 Marine 01 Anchor Handling Vessel/Tug Boat I Supply Vessel Vessels 02 Accommodation Barge I Vessel 03 Crew Boats 04 Safety Standby Vessel 05 Straight Supply Vessel 08 Survey Vessel 09 General Purpose Vessel II Dumb 1Flat Top Barge 12 Diving Support Vessel 13 Utility Vessel
LSUI 01 Underwater Engineering, Construction & Maintenance Services Underwater 02 Surface Diving Services services 03 Saturation and Surface Diving Services L S02 Offshore 01 Transportation and Installation of Structure & Pipelines Construction 02 Maintenance & Repairs of Pipelines & Subsea Structure 11.10.2 Licenses and certifications pertaining to our business and operations The following are all our licenses and certifications that are significant for our business and operations: Date Issued/ Authority Expiry Date Type of Licence
Petronas 10 May 20061 30 April 2008 Licence to supply equipment! provide services to exploration companies and DiU gas producers in Malaysia pursuant to Regulation 3, Petroleum Regulations and Section 7 of the Petroleum Development Act for the following categories: • Surface diving services;
• Saturation & Surface diving services;
• Anchor Handling Vessel/Tug Boat/Supply Vessel;
• Accommodation BargeNessel;
• Crew Boats;
• Safety Standby Vessel;
• Straight Supply Vessel;
• Survey Vessel;
• General Purpose Vessel;
• DumblFlat Top Barge;
• Diving Support Vessel; and
• Utility Vessel.

11. BUSINESS (Conl’d) Date Issued! Authority Expiry Date Type of Licence PetTonas 10 May 20061 Licence to supply equipment! provide services to 30 April 2008 exploration companies and oill gas producers in Malaysia pursuant to Regulation 3, Petroleum Regulations and Section 7 of the Petroleum Development Act for the following categories: • L S02 (0 I) Offshore Construction-Self Operated: Services! Suppliers: Transportation and installation of structure & pipelines • L S02 (02) Offshore Construction-Self Operated: Services! Suppliers: Maintenance & repairs of pipelines & subsea
• L SUI (01) Underwater Services-Self Operated: Services! Suppliers:

Underwater engineering construction & maintenance services Petron.s 10 May 20061 Licence to supply equipment! provide services to 30 April 2008 exploration companies and oil! gas producers in Malaysia pursuant to Regulation 3, Petroleum Regulations and Section 7 of the Petroleum Development Act for the following categories: •L SUI (02) Underwater Services-Self Operated: Services! Suppliers: Surface diving services • L SU I (03) Underwater Services-Self Operated: Services! Suppliers: Saturation & surface diving services
Petronas 10 May 20061 Licence to supply equipment! provide services to 30 April 2008 exploration companies and oil! gas producers in Malaysia pursuant to Regulation 3, Petroleum Regulations and Section 7 of the Petroleum Development Act for the following categories: • L SM3 (01) Marine Vessels (vessel owner+operator): Services! Suppliers: Anchor handling vesseUtug boat! supply vessel Registered name of the vessel: MV Setia Jaguh, MY Setia Gagah and MY Seria Handal • L SM3 (02) Marine Vessels (vessel operator): Services! Suppliers: Accommodation barge/ vessel Registered name Qfthe vessel: MV Jaya Installer • L SM3 (03) Marine Vessels (vessel owner-operator): Services/ Suppliers: Crew Boats Registered name of the vessel: MY Setia Damai II. BUSINESS (Con/’d) Date Issuedl Autbority Expiry Date Type of Licence Petronas 10 May 2006/ 30 April 2008 • L 5M3 (04) Marine Vessels (vessel owner-operator): Services/Suppliers: Safety standby vessel Registered name ofthe vessel: MV Setia Abadi and MV Setia Handa] • L 5M3 (05) Marine Vessels (vessel owner-operator): Services/Sunoliers: Straight supply vessel Registered name of the vessel:
MV Setia Bakti, MV Setia Handal and MY Selia Gagah • L 5M3 (08) Marine Vessels (vessel owner-operator): Services/Sungliers: Survey vessel Registered name of the vessel:
MV Selia Abadi and MV Selia Damai Licence to supply equipment! provide services to exploration companjes and oil/ gas producers in Malaysia pursuant to Regulation 3, Petroleum Regulations and Section 7 of the Petroleum Development Act for the following categories: • L SM3 (09) Marlne Vessels (vessel owner-operator): Services! Suppliers: General purpose vessel Registered name ofthe vessels:
MV Seria Abadi and MV Setia Damai • L SM3 (11) Marine Vessels (vessel operator):
Services! Suppliers: Dumb/ Flat top barge Registered name of the vessels: Jaya 281, Jaya 256, Jaya 282 and Power Barge 5

• L SM3 (12) Marine Vessels (vessel owner-operator):

Services! Suppliers: Diving support vessel Registered name ofthe vessels:
MV Setia Cekal and MV Setia Damai • L 5M3 (13) Marine Vessels (vessel owner-operator): Services! Suppliers: Utility vessel Registered name of the vessels:
MV Setia Cekal and MY Setia Abadi 11. BUSINESS (Coni ‘d) Authority MOF MOF MOF ABS DNV TNB Royal Malaysia Customs CIDB Date Issued! Expiry Date 7 October 20031 29 September 2006 7 October 20031 29 September 2006 7 January 20051 29 September 2006 8 October 20031 Perpetual 26 March 20041 25 March 2007 21 October 20031 29 September 2006 16 September 20041 9 September 2006 26 May 20061 30 June 2008 Type of Licence Cenificate of Registration as Bumiputera Contractor(f) under the following categories: • Spare parts and boat! ship accessories;
• Marine equipment;
• Sand blasting and ship painting;
• Tow boat! ferry! boat! pilot boat;
• Photography:
• Ship owner;
• Ship brokerage;
• Boat! ship salvage;
• Mooring; and
• Diving services.
Certificate of Registration as Contractor for the supply of equipment! services under the following categories:
• Spare parts and boat! ship accessories;
• Marine equipment;
• Sand blasting and ship painting;
• Photography;
• Ship owner;
• Boat! ship salvage;
• Mooring; and
• DIving services.

Certificate of Registration for supply! new services under the following categories: • Teaching aid equipment;
• Chemical laboratory;
• HospitaU laboratory equipment; and
• Building of ‘tukun tiruan’.

Certificate of Service Approval for in·water surveys Certificate for In-water Survey of Ships, HSLC and MOU’s classed by the Society in accordance with Approved Programme No 404/0 I and lACS, VI’, Z 17 as amended Certificate of Registration as Supplier and Service Contractor for the supply of equipment! services under the categories specified Forwarding Agent Licence in Terengganu for Najdah Certificate of Registration with CIDB (Grade G7·CE21) to undertake general civil engineering works of unlimited value II. BUSINESS (Conl’d)
Note: (i) A Bumiputera company lor this purpose means thaI at feasl 51% of the company’s shares are held by Bumipu/era. The company shall notify the Minislry ofFinance Malaysia ofany changes ill sJwreho/dings. 11.11 Regulations We are regulated, amongst others, by the national maritime regulations and as well as other national laws, regulations and acts in tenns of our involvement in the oil and gas industry in Malaysia. Our industry is also regulated by various industry-specific international codes and standards, established in some instances by way of international treaties in which Malaysia is a treaty member. In some instances, the international codes and standards, and the Malaysian legislation require us or our vessels to be licensed and! or cenified by the relevant authority in order for us to operate. Some of the Malaysian legislation and international codes and standards that are relevant to us are set forth below. However, the following does not purpon to be an exhaustive description of all the relevant codes, standards, legislation, rules and regulations governing us. • Petronas licence; • MOF Licence;
• the Malaysian Shipping Ordinance 1952;
• the United Nations Convention on the Law of the Sea;
• the SOLAS Convention;
• the ISM Code 2002; and
• the ISPS Code.

Please refer to Sections 10.9.1 and 10.9.2 of this ProspeclUs for further inforn13tion on the Malaysian legislation and international codes and standards mentioned above. 11.12 List of Awards We were conferred safety awards as listed below through AMSB, by our clients for the recognition of our effon in complying with various safety standards for a specific period of time. Vear Awards Awarded by 2001  Contractor Safety Award Programme  Excellent Safety Performance  2002  Contractor Safety Award Programme  2003  Cenificate ofAchievement of2.4  million man-hours without loss time  mJury  20031  Contractor Safety Recognition “Gold  2004  Award”  2005  Contractor Safety Award Programme  20041  Excellent HSE Performance “Gold  2005  Award”
ExxonMobil Exploration and Production Malaysia Inc. ExxonMobilExploration and Production Malaysia Inc. TL Offshore Sdn Bhd ExxonMobilExploration and Production Malaysia Inc. ExxonMobil Exploration and Production Malaysia Inc. Petronas Carigali Sdn Bhd II. BUSINESS (Cont’d) 11.13 Major Suppliers We have a wide supplier base comprising of local and foreign companies. The main component in our cost of sales comprise of charter hire of vessels in respect of third (3″‘) party vessels and crew costs and related vessel expenses (such as depreciation, amortisation, and other vessel­running expenses) for the vessels that we own. For the financial year ended 31 December 2005, approximately 58.7% ofour cost ofsales were sourced locally, whilst 41.3% were imported. Apart from the charter hire expenses in respect ofthird (3″‘) party vessels, none of our direct cost components are deemed volatile. Our charter hire expenses in respect of the other vessels are subject to the demand and supply conditions for vessels in our industry. Notwithstanding the above, we are able to transfer, all or part or the increase in our charter hire expenses in respect of third (3″‘) party vessels, to our customer. Hence, we are able to mitigate, in entirety or partially the increase in our charter hire expenses in respect ofthird (3″‘) party vessels. Throughout the years of operations, we have established and maintained good rapport and reputation with our suppliers and have not experienced difficulties in obtaining their services. None of our suppliers individually contribute to 10″10 or more of our cost of sales for each of the past three (3) financial years ended 31 December 2005. 11.14 Major Customers We have a wide customer base comprising oflocal and foreign companies. The main component in our revenue is the revenue derived from the charter hire of vessels. For the financial year ended 31 December 2005, approximately 87.6% of our revenue were derived locally, whilst 12.4% were from overseas. Set-forth below are the principal market for our services for the financial year ended 31 December 2005. Principal Market Revenue Contribution (RMOOO) (%) Malaysia 120,576 87.6 Overseas Indonesia 7,026 5.1 Russia 6,585 4.8 UAE 2,530 1.8 Australia 1,02t 0.7 Total 137,738 100.0 11. BUSINESS (Conl’d) Our major customers, being customers who individually contribute to 10% or more to our revenue for each ofthe past three (3) fmancial years ended 31 December 2005 are as follows. Name of Country Lengtb or Senrices Re\’eDue Contribution Customer of origin relationship provided 2003 2004 2005 (RM (%) (RM (%) (RM (%) Yean million) million) million) Petronas Malaysia 6 Charter 15.9 16.7 30.9 25.6 37.9 30.1 Carigali hire of Sdn vessels Bhd-DDR As we have a wide base of other customers, most of which are located in Malaysia as well as a few who are located overseas, we are of the view that we are not over dependent on any single
customer. In addition, in the event that the contracts from Petronas Carigali Sdn Bhd -DDR expires or we no longer receive any contract from them, our vessels that are currently used to service
Petronas Carigali Sdn Bhd -DDR contracts can be easily utilised to service our other customers without any significant impact on our business operations or results. [The rest of this page is left blank] II. BUSINESS (Col/I’d) 11.15 Location of Operations Our Group primarily operates from our headquarters, three (3) local offices! branch offices and one (I) overseas branch office. In addition, we also have two (2) local unit which is used as a storage area/crew lodging. Save for our headquarters which we own, all of our other officesl branch offices and storage area arc rented by us. The details of our rented officesl branch offices and storage area is set forth below, whilst the details of our headquarters is disclosed in Section 11.16 of this Prospectus.  Postal address  Le.uor  Tenure of leasel Expiry date oflease  Approximate age of the building! Date ofCertificate ofFitness  Existing use  Built-up area sq. meters  Monthly rental RM  Door 10, III Floor Admin Building A Pengkalan Bekalan Kemaman 24007 Kemarnan, Tcrengganu  Pangkalan Bekalan Kemamnn  I yearl 2007  25 years! N/A  Branch office ror AMSB  18.6  402  No. 68, Ground Floor Persiaran Venice Sutera Satu 32200 Lumu’, Perak  Ceai Ein  5 years! 2008  5 years! N/A  Branch office forAMSB  130.1  500  Door 6 & 8, I” Floor Admin Building A Pengkalan Bekalan Kcrnaman 24007 Kcmaman, Tercngganu  Pangkalan Bekalan Kemaman  1year! 9 June 2007  25 years! N/A  Office ror Najdah  122.0  803  Office 203 Matar Al Tayer Building AI Karama. P.O. Box 119181 Dubai, United Arab Emirates  Rocky Real Estate L.L.C  I yearl 2007  12 yearsl N/A  Branch office rorWIF  83.6  5,000  Warehouse 12, Door 12 P.O. Box 17 Admin Building B Pengkalan Bekalan Kemaman 24007 Kemanlan. Terengganu  Pangkalan Sekalan Kemaman  I year! 2007  25 years! N/A  Warehouse rorAMSB  139.4  1,589  PT 6867, Pusa’ Pemiagaan Bukit Kuang 24000 Kemaman, Terengganu  Ahmad Hafez bin Hussain  2 years! 2007  2 years! N/A  Crew lodging/store for AMSB  278.7  3,000
197 [ Company No.: 700849-K I II. BUSINESS (ConI ‘d) 11.16 Properties We, through our wholly-owned subsidiary, AMSB, own two (2) office units. The details ofthe properties we own are set out in the table below:
_00  Existing use!  Approximate age ofbuilding I  NBVasat  Location  Postal address  owner  Restrict:ion-in-interest  Tenure  Dale ofCertificate of FItness  Buift-up area  31.12.05  sq. meters  RM
Parcel No. 38E-2 No. 38E-2, Level 2 AMSB ~ “” Office’ None The land upon which the 233 years’ 330 545,197″” (held undcrH.S. (M)5823 -5833 Jalan Radin Anum property is erected is a 28 Augusr2003 r” Lot No. 24333 -24343 Bandar Baru Sri Petaling 99-)<31″ leasehold Mukim orPctaling, Kuala 1-tm1Jur) 57000 Kuala Lumpur expiring 5 April 2078
Parcel No. 38F-2 No. 38F-2, Level 2 AMSB ~”” Office’ None The land upon which the 233 years’ 517 885,986″” (held under H.S. (M) 2067-2069 Jalan Radin Anum property is ercctoo is a 28 August 20031’1 Lot No. 24261 -24263, Mukim Bandar Baru Sri Petaling 99-)<31″ leasehold of Petaling, Kuala Lumpur) 57000 Kuala Lumpur expiring 5 April 2078
Noles: (0 Charged (0 Malayan Banking Berhnd via a Deed ofAssignment dated /9 April 2004 pursuant to afncility agreement between AMSB and Malayan Banking Berhad dated 19 April 1004.
(ii) Dare ofi.Hl/unce ofthe Cerrifil:ate o[Fitness/or Occupation by Kuala Lumpllr City Hall. (iii) As at rhe Latest PraClicable Dmc. lhe $ub-(livitled simla title oflhe properties lias yel to be issued by lhe land office. As such, the master title oflhe properties i.f registered in the name of }Jrtaling Garden Berhad (the developer ofthe properties) wllilst AMSB is the legal and beneficial owner ofthe properties. (iI) No valumion exercise has been carried out on the property since its acquisition 011 6 November 2003. We wish to highlight that, to the best of our knowledge and belief, the properties stated in Sections 11.15 and 11.16 above; (i) have nol breached any of the land-use conditions/permissible land usc; and (ii) where buildings are involved, there has not been any material non-compliance with current statutory requirements, land rules OT building regulations. None ofour properties was acquired during the two (2) years preceding the Latest Practicable Date. In order to minimise the potential damage caused by a breakout of fire, we have ensured that our physical assets have adequate insurance coverage and that proper fire safety procedures are implemented and practiced at our premises. 198 11. BUSINESS (Cont’d) 11.17 Employees As at the Latest Practicable Date, we had 228 employees. Set forth below is the breakdown of our employees by category and their respective years of service: Number or years in service Employee Category  Less than 1 year  1 to 5 years  More than S )’ears  Tota)  Directors Managerial Executive  4 10  10 6  4  4 15 16  Technical & Supervisory Admin & Clerical Crew  3 176  2 10  2  5 12 176  Total 193 28 7228

Employees who have worked for our Group for more than five (5) years are mainly our Directors. Meanwhile, our crews who are employed on three (3)-months’ renewable contract terms accounted for approximately 77.2% of our Group’s total workforce. The other employees under our Group are employed on a permanent basis. None of our employees is a member of any union and there has not been any industrial dispute in the past involving our employees. We emphasise the importance of providing training for our employees. As such, from 2003 to 2005, we have provided the following training and development programmes as set out in the table below: Training Programmes  Required By  Date  Consultant  Company Security Officer  IMO  04.06.2003  Class -ABS  Internal Safety  AMSB  15.10.2003  Designated Person Ashore  Management System  Ship Security Officer  IMO  26.01.2004  Centre of Marine Excellence (“CME”)  Ship Security Officer  IMO  17.03.2004  CME  Basic Rigging and Slinging  Charterers  20.03.2004  Competency Centre, Kuala Lumpur  Basic Safety Training  Charterers  21.03.2004  Construction and Industrial Safety Training  Centre Sdn Bhd (“CONSIST”), Kuala Lumpur  Ship Security Officer  IMO  28.04.2004  CME  Job Safety Analysis  Charterers  06.04.2004  CME  Internal Auditor  IMO  15.12.2004  Midland Consultants  Safety Management System  IMO  30.01.2005  Designated Person Ashore
11. BUSINESS (Conl’d) Training Programmes Shipboard Management
Rcq”ired By .=D:.:’::lo:-__ Consultant Standard of 04.04.2005 Malaysian Maritime Academy Sdn Bhd Training and Certification for Watchkeepers (“STCW”) Apart from the training programmes disclosed in the previous table, we plan to provide additional training for 2006 as set out in the table below: Training Programmes Ship Security Officer Job Safety Analysis Effective Safety Committee Operations Hazard Identification Accident Investigation Course Effective Safety Supervision Marine Hull Insurance Levell Marine Hull Insurance Level 2 Tripod Beta Management Training Institution Required By  Budget Cost  IMO  RM7,440  Charterer  RM3,990  Charterer  RM6,190  Charterer  RM5,030  Charterer  RM2.560  Charterer  RM9,480  Charterer  RM3,700  Charterer  RM4,OOO  Chanerer  RM2,870
Malaysian Maritime Academy Sdn Bhd, CONSIST, CME, Pelorus Intelligence & Tech Academy Sdn Bhd (“PELORUS”) and Classification Body Malaysian Maritime Academy Sdn Bhd, CONSIST, CME, PELORUS and Classification Body Malaysian Maritime Academy Sdn Bhd, CONSIST, CME, PELORUS and Classification Body Malaysian Maritime Academy Sdn Bhd. CONSIST, CME, PELORUS and Classification Body Malaysian Maritime Academy Sdn Bhd, CONSIST, CME, PELORUS and Classification Body Malaysian Maritime Academy Sdn Bhd, CONSIST, CME, PELORUS and Classification Body Malaysian Maritime Academy Sdn Bhd, CONSIST, CME, PELORUS and Classification Body Malaysian Maritime Academy Sdn Bhd, CONSIST, CME, PELORUS and Classification Body Malaysian Maritime Academy Sdn Bhd, CONSIST, CME, PELORUS and Classification Body 11.18 Employees’ Share Option Scheme The number of Shares comprised in the Options offered and to be offered under the ESOS shall not exceed 15% of the issued and paid-up share capital of AMRB at anyone time. Based on the enlarged issued and paid-up share capital of AMRB, upon completion of the IPO, of RM81,168,041 comprising 162,336,082 Shares, the number of new Shares to be issued pursuant to the ESOS is 24,350,412. 11. BUSINESS (Conl’d) When Options are granted before the Company is listed on Bursa Securities (“Initial Grant”), the exercise price shall be as follows: Exercise Period Year 1 Year 2 Year 3 Year 4 YearS Exercise Price RML65 RML65 RML82 RML82 RM2.00 Where the Options are granted on or after our Listing on Bursa Securities, the exercise price shall be at the higher of (i) the weighted average market price of the Shares for the five (5) market days immediately preceding the date at which Options are granted (subject to a discount of up to 10%); or (ii) the par value of the Shares, whichever is the higher. The eligible directors and employees of AMRB Group will only be allowed to exercise the Options subject to the following limits: Exercise Period Year 1 Year 2 Year 3 Year 4 Year 5 Maximum percentage of Options exercisable in each
5% 10% 20% 30% 35%year commencing from date of acceptance
Shares issued upon the exercise of an Option shall rank pari passu in all respects with the then existing issued Shares save that they will not entitle the holders thereof to any dividends, rights, allotments andlor other distributions declared, made or paid to the shareholders of our Company, the entitlement date of which precedes the date of allotment of the new Shares that may be issued upon the exercise of the Option and will be subject to all the provisions of the articles ofassociation of our Company. Please see Section 21 of this Prospectus for further information on the bye-laws ofour ESOS. 11.19 Health, Safety and Environmental Policy The health, safety and environmental policy in relation to the Malaysian legislations are as follows: 11.19.1 Health and Safety The Occupational Safety and Health Act, 1984 (“OSHA”) provides that we must ensure, so far as is practicable, the safety, health and welfare at work of all their employees; and must prepare and revise a \\’fitten statement of general policy on safety and health at work of their employees and the organisation and arrangements for implementing such policies. The Occupational Safety and Health (Safety and Health Committee) Regulations 1996 also requires us to establish a Safety and Health Committee at the workplace if there are 40 or more employees or as directed by the Malaysian Government. The employer must consult the Safety and Health Committee with a view to making and maintaining health and safety arrangements, ensuring effective co-operation between employer and employees, developing measures to ensure the safety and health at the workplace, and in monitoring the effectiveness of such measures. 11.19.2 Environment Please refer to Section 10.9.2 of this Prospectus for further information on the EQA established to enhance the environment. II. BUSINESS (Cont’d) 11.20 Agreements As at the Latest Practicable Date, we do not have any brand name, trade mark, technical assistance agreement, franchise and intellectual property rights. Our management are also not aware of any commercial or financial contracts/agreements, in the ordinary course of business, on which the corporation is highly dependent on. In respect of our charter party agreements with our customers, we believe we have a good mixture of long, medium and short term contracts. In aggregate, we currently have secured an order book of RM609.3 million, of which approximately RM369.0 million are outstanding value and these would be reflected in our results in 2006 and future financial years. Our secured contracts mainly comprise contracts with a primary life of one (I) to two (2) years (shortJmedium term contracts), with options for renewal at the end of their respective primary life. In addition, we also have two (2) contracts which will run for approximately another seventeen (17) years up to 2023. We believe that we will be able to generate a steady stream of income through our long term contracts whilst at the same time realising the potential earning growth from the high rate shortJmedium term contracts. Premised on the above, our Management are of the opinion that we are not highly dependent on any particular charter party agreement/contract as, in the event of expiry or tennination/cancellation of our contracts, we will be able utilise our vessels that are currently deployed to service our existing contracts, to service our other customers without any significant impact on our business operations or results. 11.21 Seasonality of Services The offshore support vessels and services industry, particularly in Malaysia, would also be subject to the risk of increase in down time or off hires due to adverse weather condition (i.e. monsoon seasons). Two (2) of our smaller-sized vessels, which are under spot contracts and our underwater services would be inevitably affected by the monsoon seasons and this would result in a fluctuation ofour earnings over the financial year. Notwithstanding the above, thirteen (13) out of our fifteen (15) vessels are currently under fixed charter contracts. In respect of our vessels which are under fixed charter contracts, we are required to make available the vessels, throughout the period of time, which in tum will provide us with a steady stream of income.



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