Industry Overview



Infocredit D&B (Malaysia) Sdn Bhd (527570-M)
Level 9·3A Menara MUenium, Jalan Daman/ela,
Pusal Bandar Oamansara, 50490 Kuala Lumpur, Malaysia.

Tel’ 6032718,1000 Fax’ 603.27181001 Websile,
Date: 6 June 2006
The Board of Directors Alam Maritim Resources Berhad 381′, Level 2, Jalan Radin Anum Bandar Baru Sri Petaling 57000 Kuala Lumpur Malaysia
This Executive Summary has been prepared for inclusion in the Prospectus to be dated 29 June 2006 pursuant to the proposed listing of Alam Maritim Resources Berhad (“AMRE”) on the Main Board of Bursa Malaysia Securities Berhad.
This research is undertaken with the purpose of providing an overview of the offshore support vessels and services industry in Malaysia. The research methodology for the research includes both primary research, involving telephone interviews of pertinent companies, as well as secondary research such as reviewing press articles, periodicals, Government publications, corporate databases, Internet research and online databases.
Infocredit D&B (Malaysia) Sdn Bhd C’Infocredit D&B or the Researcher”) has prepared this Executive Summary in an independent and objective manncr and has taken all reasonable consideration and care to ensure the accuracy and completeness of the Executive Summary. In addition, the Researcher acknowledges that if there are significant changes affecting the contents of the Executive Summary after the issue of the Prospectus and before the issue of securities, then the Researcher has an on-going obligation to either cause the Executive Summary to be updated for the changes and, where applicable, cause the Company to issue a Supplementary Prospectus; or withdraw our consent to the inclusion of the Executive Summary in the Prospectus.
The Executive Summary is highlighted in the following sections.
For and on behalf


Tan Sze Chong
Managing Director


Dedde with Confidence
This summary provides an overview of the industry in which the AMRB Group operates within, namely the provision of offshore support services for the offshore oil & gas exploration and production (“E&P”) facilities. The coverage is focused on the product and service category of offshore support vessels and services and the provision of subsea / underwater services. The offshore support vessels division, which is the main revenue contributor to the AMRB Group, involves the provision of offshore support vessels such as anchor handling, towing and supply vessel, utiliry vessel and diving support vesseL The underwater services division is equipped with technological-advance equipments such as saturation diving system, decompression chambers, underwater cutting and welding tools and remotely operated vehicle (“ROV”). Underwater services comprise a diverse range of services such as saturation diving, underwater video and photography, ROV inspection and pipeline maintenance and repair service.
As the operations of offshore support services industry are directly related to the level of activities in the offshore oil and gas industry, it is worthwhile to have an overview of the oil and gas industry.
1.1 GLOBAL OIL AND GAS INDUSTRY Essentially, the fluctuation in crude oil prices relates very much to the fundamentals of demand and supply conditions of the global market. The strong global demand was mainly attributed to the robust industrialisation activities of PR China and increasing demand in the US. With a surging economy, PR China overtook Japan in 2002 to become the second largest oil consumer after the US and accounted for at least one-third of the increase in global demand. The market sentiment was further heightened by the geopolitical risks in some producing countries, among others Nigeria, Venezuela, Iraq and Iran, resulting in the risk premium inherent to crude oil prices widening significantly and ultimately, higher speculative activities.
1.2 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 North Sea and the Gulf of :Mexico. It is expected to have the highest growth rate of all
the eight regions in the world, in terms of offshore exploration and offshore activities. It has also been estimated that around 20 billion barrels of oil equivalent (“boe”) await prospector.; in the region’s vast, but largely untapped deepwater acreage, representing more than 400/0 of the region’s proven oil reserves. Many countries in the region have had fa1ling crude oil production rates for several }l”‘ars but have only recently begun addressing this decline by allowing exploration activities in the deepwater realm.
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 Per.;ian Gulf. The Per.;ian Gulf encompasses countries like Bahrain, Iraq, Iran, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates. O:>llectively, these countries hold around 57% of the global crude oil reserves. Even more significantly, the Per.;ian 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 15 }l”‘at5, according to the Energy Information Administration (“EIA”) in the United States. 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 posicion).
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 over the near future. Overall, Saudi Arabia may contain up to 1 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 plap in the global oil and gas industry. Saudi Arabia claims that it is easily capable of producing up to 15 million barrels per day in the future and maintaining that production level for another 50 }l”‘at5. There were a total of 1,076 offshore platforms in the Middle East in 2004.

Malaysia has more than 560,000 square kilometer.; of acreage available for petroleum exploration, of which 36.3% are currently covered under the terms of the production sharing contracts (“PSC’). Supported by the monopolistic and privileged status in the upstream sector, Petroliam Nasional Berhad (“PETRONAS”) has entered into 59 PSCS with the multinational oil and gas
companies, in exchange for a share of the total production. Two of the five new PSCS signed during the Joear 2004/2005 were for ultra-deepwater blocks covering water depths of up to 4,000 metres. Out of the 140 oil fields discovered in Malay;ia, there are currently 53 producing fields. In the case of natural gas, out of the 183 gas fields discovered, 22 currently are in production.
As at January 2005, Malay;ia’s crude oil and condensate reserves increased from 4.84 billion barrels in 2004 to 5.29 billion barrels while gas reserves declined from 87.02 trillion standard cubic feet (“tsd”) to 8520 tsd. Under the current pace of development and production rate, the crude oil and natural gas are expected to last for approximately 19 Joears and 33 Joears, respectively.
During the Nmth Malay;ia Plan 2006-2010, PETRONAS is expected to invest around RM43.8 billion. Out of this amount, RM13.1 billion (29.9%) will be spent on exploration, development and production activities in order to enhance the long term supply of oil and gas. During the Asian Annual Oil and Gas Q:mference in Kuala Lumpur in June 2004, PETRONAS armounced plans to increase oil and gas production by 3% per armurn over the next five Joears. During the same period, around 40 offshore platforms are plarmed to be installed.
2 INTRODUCTION & BACKGROUND OF OFFSHORE SUPPORT SERVICES In the early day;, oil exploration and production activities started onshore. Qude oil was produced onshore and transponed using shallow draft tankers and crude oil barges. In turn, these were towed by tugs along the river to other tank farms for storage or to storage tankers for expon purposes. As oil production moved progressively from onshore to offshore, oil eX’]Jloration, development and production activities increased in tandem. This resulted in more companies stepping up their involvement in both the oil and gas and offshore suppon services industries.
Today, oil exploration has also ventured into deep-water exploration, which contains significant oil and gas deposits, and in harsh environment with the aid of the latest technologies. Offshore suppon services are provided at the various phases of offshore exploration and production of crude oil and natural gas.
Offshore exploration and production activities are dominated by both large integrated oil and gas companies and national oil and gas companies. Most large 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 companics are PETRONAS of Malaysia, PT Penamina of Indonesia, Petroleum Authority of Thailand, Ollna National Offshore Oil Corporation, Q1ina National Petroleum Corporation, Saudi Arabian Oil Co. and Nigerian National Oil Company.
Supponing these integrated and national oil and gas companies are companies providing a wide range of suppon services relating to the oil and gas industry. These suppon services could be provided at various phases of the value chain of the industry that encompasses services such as consultancy, engineering, fabrication and construction, pipeline maintenance and repair, marine transponation, drilling and well services, environment and safety, equipment repair and service, cenification, verification and inspection and others.
The entire value chain of the oil and gas industry is diagrammatically illustrated below:
Figure 1: Value Chain of the Oil and Gas Industry in General

Downstreatn Activities
• Refining




Sowre: Irfcx:n:dit D& B
2.1 UPSTREAM SECfOR Various services are involved m the upstream activities. Over the last 30 years, vanous supporting industries have developed along side the oil and gas industry in Malaysia. The main beneficiaries from the upstream sector which support the exploration and production (“E&P”) activities are companies involved in seismic surveys, exploration drillings, deep sea diving, drilling rigs rental and offshore logistic companies providing support and supply by way of vessels and helicopters.
As almost all of Malaysia’s oil and gas reserves lie offshore, most of the E&P activities are concentrated armmd the continental shelves. The upstream activities may be broadly categorised into two (2) phases namely, exploration and production.
2.2 ()LASSIFICJ\TI()~ There is a wide variety of support services available to the offshore oil and gas industry. The market segmentation of offshore support services is set out in the following figure. For the purpose of this report, the focus coverage is on the provision of offshore support vessels and services supporting the oil and gas E&P activities. This is the main business activities of the
AMRB Group, contributing to approxirnately95% of the Group’s FYE2005 revenue.
Figure 2: Market Segmentations of the Oil and Gas Support Services Industty

z ~~, ~ …..”””””,.,…,__
……….”._” WA’ ‘-‘ • “‘~”‘_ _ ~_

Provision of Offshore ‘
Subsea/Underwater !I
Support Vessels &;
Support Services
Services ,

Ohers mlude fabrication/ronstn«:tion senia:s, ronsultarry serUa:s, drilJilf. ani wfl senia:s, erptiprrFnt repair senias, supply if
eqttiprrFnt ani ronsumJldes, emirrJJ111’1.?J1td & safety senia:s, m:

Source: lrfoorxlit D& B

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:

Platfonn SupplyVessel (“PSV”);

Anchor Handling Tug/Supply (“AHT/S”) Vesse4

Anchor Handling, Towing and Supply Vessel (“ARTS”);

Standby Rescue Vessels(“SRV”);


Work Boat & Work Barge;

SurveyVessel (“SV”);

Utility Vessel (“UV”); and

Diving Support Vessel (“DSV”).




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 exploration and production 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 developments in Malaysia had been dela)”‘d 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 in-place 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 has been explored. The recent rash of discoveries is set to spark a boom in jobs for service providers like the AMRB Group.
Globally, there are approximately 7,300 of oil and gas platforms. Of the total amount, it is estimated that approximately 43.8% is located in the US Gulf, 14.6% in the Middle East region and 15% in the Asia Pacific region.
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% per annum over the next 5 )”‘ars, it is anticipated that more platforms will be built, hence increasing the demand for offshore support services, especially the services of offshore support vessels.
The oil and gas industry in general is a heavily 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 byPETRONAS 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 Ministry of Finance is also regulating the industry through the issuance of relevant licences.
Besides the above licences, service providers such as the AMRB Group must also adhere and conform to the 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 American Buteau of Shipping and Det Norske Veritas prior to commencement of operations.
The licensing and certification requirements act as deterring factors for new entrants as they are not easily attainable while confonnity to international standards involves various procedures and substantial amount of documentations.
Generally, the offshore support vessels and services industry is perceived to be a competitive industry. o,mpeting players in this industry are wide and include companies of various sizes, ranging from large multinationals to local companies, both large and small. To remain resilient against adverse market conditions and stay ahead of competition, the competitive factors are price and quality of vessels and services.
Presently, there are fifteen (15) major players in Malaysia that are engaged in the provision of offshore support vessels and services. These players in aggregate owned approximately 160 vessels which consist of various types of offshore support vessels such as ART, ARTS, DSV, UV and Workbarge/Workboat. It is noteworthy that the number of offshore support vessels is constantly changing as the demand is dependant on the level of exploration, development ad production activities in the oil and gas industry.
The market size for the offshore support vessels and services industry in 2004 is estimated at approximately RM1 billion. The top five (5) major players in 2004 were Burni Annada
Navigation Sdn Bhd, AMRB Group, Tanjung Offshore Berhad, Syarikat Borcos Shipping Sdn Bhd and Tidewater Marine Services (M) Sdn Bhd. Based on the total revenue generated in 2004, the AMRB Group garnered approximately 12% of the market share in the provision of the offshore support vessels and services to the oil and gas industry.


3.5.1 INCREASING DEMAND FOR OIL AND GAS Oil and gas are eJo:pected to account for around two-thirds of global energy consumption by 2020. Similar to other commodities, the industrialization and economic growth of PR QUna have led to voracious demand for crude oil and natural gas. PR GUna overtook Japan to become the second largest consumer of oil and gas in 2002, after the United States. The country is projected to account for 25% of global oil consumption by 2025. The global consumption of oil rose by
2.9 mi1lion barrels per day in 2004, the sharpest rise in demand in 30 years. PR China’s surging oil imports accowlted for as much as 30% of the increase. The country’s arulUal oil bill is running at about US$89 billion, or 5.3% of GDP, twice as high as the global average. In the case of South Korea and Taiw,m, 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 exploration and production activities, with the spill-over effects reaching the support services companies eventually.
3.5.2 RISING CRUDE OIL PRICES Rising crude oil prices have spurred the oil and gas industry to undertake more exploration and production 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 supply­demand gap for energy.
Table 1: Average elUde Oil Prices 2000 • 2005
USS/bbl Crude Oil % increase 2000 27.60 – 2001 23.12 -162 2002 24.36 504 2003 28.10 15.4 2004 36.05 28.3 2005 50.64 40.5 CAGR 12.9

Saua!; ~on ofPetrd.ewnExporting Camtrie5
3.5.3 NEW FRONTIER IN DEEPWATER E XPLORATION The next impetus for growth in the oil and gas industry would be in deepwater and ultra­deepwater explorations. With oil and gas resources being finite, oil and gas companies are going further afield to recover hjUrocarbons from remote locations. Deepwater refers to water depth of between 200 metres and 1,000 metres while ultra-deepwater refers to water depth beyund that.
Many terrestrial techniques don’t work well in deepwater situations. The cost of drilling just one dry well in a deepwater environment top US$SO 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 the months it would have taken a few years ago. 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 e~s 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, utilizing a series of receivers dropped in a specific pattern 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 sedinlents. 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 armounced several major deepwater crude oil finds in East Malaysia, with an estimated 1,540 million barrels of oil equivalent. 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 capital spending to offset declining production volumes and to increase their reserves to meet the anticipated demand for crude oil in the future.
I Kamunsu East North 2000 2008 Sabah Shell
Kikeh 2002 560 2007 Murpb.yOil
I I I 4. Kikeh Kecil S. G~usut 2003 2004 100 300 2009 2008 Murphy Oil Sabah Shell
I 6. Kakap 2004 75 2610 Mwphybil
I i I I ! 7. Senangin 8. Malikai 2004 2004 100 100 2010 2009 Murphy Oil Sabah Shell


Sourc:e Irfoor:rlit D& B
3.5.4 INCREASING UNDERWATER / SUBSEA OPERATIONS 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 subsea isolation systems to give further protection of the installation and the persons on it against the failure of the topside emergency shutdown valve or the rupture of the 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. Grcumstances like these would require specialised equipments such as a ROV to be deployed underwater to undertake survey and sampling activities. In turn, offshore support vessels are used to support these activities.
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 subjected to severe corrosion while the jackets of a production platform sink into the seabed and are prone to attack by h)drogen 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 from 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 in 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 equipment and personnel.
START OF DECOMMISSIONING ERA Many oil and gas platforms are approaching the end of their lifecydes in the Asia-Pacific region. This heralds the start of the deconunissioning era in the oil and gas industry due to aging offshore platforms. With congested waterways and increasing cargo ship traffic, the proper deconunissioning 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. Qm-ently, 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 services of offshore vessels in carrying the deconunissioned parts back to the shore as well as the requisite equipment to perform the deconunissioning.
3.5.5 GROWING DEMAND FOR NON·DESTRUCfIVE TESTING SERVICES Non·destructive testing is an extremely important field in the industrial sector. Although it is sometin1es 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 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 characterization, stress management and inspections in-service in recent )”ars. The COrrect application of non-destructive testing can help to prevent accidents, save lives, protect the environment and avoid economic loss.
3.6 CONC1UDING REMARKS The demand for offshore support services in the oil and gas industry is correlated to the performance of the laner. Oil and gas companies decide to embark on their exploration and
production decisions based on the crude oil and natural gas reserves, geology, national production policies, national depletion policies, availability of technology, prices 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.
High oil and natural gas prices invariably have the potential of increasing the level of natural gas and crude oil exploration and production activities as it tends to increase the profitability of petroleum companies. Since the )”ar 2003, there has been an increasing trend in both crude oil and natural gas exploration and production, due to the rising crude oil prices in the )”ar before. Specifically, in the Asia Pacific region, Ollna is generating a thirst for more crude oil and natural gas due to its rapid industrialisation and the establishment of a strategic reserve stockpile. In addition, a cumulative of USD3 trillion is projected to be invested in the global arena, of which 70% is expected to go into the upstream activities. TIlls poses great potential and will strongly result in an increase in the demand for offshore support vessels and subsea services.
Specifically in Mala~ia, the oil and gas industry is projected to expand further as the country is one of the major beneficiaries of increased crude oil prices in Asia, as it is a net exporter of crude oil. This translates into increased offshore support services, including both offshore support vessels and subsea services. The advent of deep water exploration and production is also anticipated to increase the demand for both offshore support services and subsea services as these petroleum fields lie at a greater distance from the shore. While deepwater reservoir targets are geologically similar to reservoirs drilled in shallower water, the demand for the logistics to support the production of hydrocarbons from reservoirs located below such water depths is much greater. Being an industry that relies greadyon mission critical services and safety aspects, the provision of offshore support services and subsea services is critical to the well-being of the


oil and gas industry. Furthermore, as technology improves, new fields will be discovered and both marginal fields and small fields can be exploited more economically. The ripple effects will be transmitted along the entire value chain.




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