Industry Overview

8. INDUSTRY OVERVIEW 8. INDUSTRY OVERVIEW
Vital Factor Consulting Sdn Bhd (Company No.: 266797-T) 21 November 2016 V Square @ PJ City Centre (VSQ) Block 6 Level 6, Jalan Utara The Board of Directors 46200 Petaling Jaya Serba Dinamik Holdings Berhad Selangor, Malaysia No. 8-5, Pusat Dagangan UMNO Shah Alam Tel (603) 7931 3188 Fax (603) 7931 2188 Lot 8, Persiaran Damai Seksyen 11 www.vitalfactor.com 40100 Shah Alam Selangor Darul Ehsan Dear Sirs/Madam Independent Industry Assessment of Asset Maintenance for Oil and Gas, and Power Generation
We have attached a report on the above prepared for inclusion in the prospectus of Serba Dinamik Holdings Berhad (herein together with all or anyone or more of its subsidiaries will be referred to as Serba Dinamik Holdings Group or the Group) in relation to its initial public offering of the entire issued and paid-up share capital of Serba Dinamik Holdings Berhad on the Main Market of Bursa Malaysia Securities Berhad. We have prepared this report in an independent and objective manner and had taken all reasonable consideration and care to ensure the accuracy and completeness of the report. It is our opinion that the report represents a true and fair assessment of the industry within the limitations of, among others, secondary statistics and information, and primary market research. Our assessment is for the overall industry and may not necessarily reflect the individual performance of any company. Certain statements, including assessments and opinions in this report, are forward-looking in nature, and are subject to uncertainties and contingencies. While statements made in this report are based on, among others, secondary statistics and information, primary market research, and after careful analysis of data and information, the industry is subjected to various known and unforeseen forces, actions and inactions that may render some of these statements to differ materially from actual future results. In light of these and other uncertainties, the inclusion of forward-looking statements in this report should not be regarded as a representation or warranty that our assessment will be justifiable. Given the risks and uncertainties of future events and conditions, we advise investors not to place undue over-reliance on those statements and, where relevant, seek further independent and expert advice. We do not take any responsibilities for the decisions or actions of readers of this document. This report should not be taken as a recommendation to buy or not to buy the shares of any company. Yours sincerely
Managing Director 175 8. INDUSTRY OVERVIEW (Cant’d) C VITAL FACTOR CONSULTING . ® Creating \Mnning Business Solutions INDEPENDENT INDUSTRY ASSESSMENT OF ASSET MAINTENANCE FOR OIL AND GAS, AND POWER GENERATION
1 BACKGROUND AND INTRODUCTION • Serba Dinamik Holdings Berhad (herein together with all or anyone or more of its subsidiaries will be referred to as Serba Dinamik Holdings Group or the Group) is an energy services group providing engineering solutions to the oil and gas, and power generation industries with operational facilities in Malaysia, Indonesia, United Arab Emirates (UAE), Bahrain, and United Kingdom (UK).
• Within engineering solutions, the Group provides operations and maintenance (O&M) services, and engineering, procurement, construction and commissioning (EPCC) works. For the financial year ended (FYE) 2015, the provision of O&M services and EPCC works accounted for 90.87% and 8.91 % of the Group’s revenue respectively. Within O&M services, the Group mainly carry out
maintenance, repair and overhaul (MRO) of rotating equipment which includes gas and steam turbines, engines, motors, pumps, compressors and industrial fans; inspection, repair and maintenance (IRM) of static equipment and structures which includes boilers, unfired pressure vessels, piping systems and structures; and maintenance of process control and instrumentation.
• The revenue for Serba Dinamik Holdings Group for the past three FYE 2013, FYE 2014 and FYE 2015 were largely derived from the oil and gas industry. As such, this report also provides more emphasis on the oil and gas industry in contrast to the power generation industry.
• Within the oil and gas industry, the Group undertakes maintenance services for, among others, oil and gas production platforms, crude oil refineries, gas processing and liquefaction, and petrochemical manufacturing plants. As such, this report is focused on asset maintenance of such plants, facilities and equipment. In addition, this report will also discuss oil and gas production, as well as downstream activities.

2 INDUSTRY OVERVIEW • The energy industry, including oil and gas, and power generation, is an asset intensive industry involving a vast amount of investments in plant facilities and equipment. Once oil and gas wells are in production, the overall performance of companies in the energy industry depends highly on the performance of their assets. In the current global competitive landscape, asset maintenance is key to ensure that plant facilities and equipment are operating at its optimum level. Serba Dinamik Holdings Berhad Page 10’71 Industry Assessment 176 8. INDUSTRY OVERVIEW (Cont’d) O VITAL FACTOR CONSULTING . Creating ‘Mnning Business Solutions ® • The provIsion of maintenance services for such assets requires track record, skilled workforce, technical knowledge, equipment and machinery, supporting systems, products and services.
Maintenance of Plant Facilities and Equipment • Maintenance services involve carrying out inspection on plant facilities and equipment, using preventive and corrective actions to ensure that facilities and equipment are kept in operating conditions. Generally, maintenance of plant facilities and equipment can be broadly divided into the following: Maintenance of Plant Facilities and Equipment StructuresRotating Equipment Static Equipment :—I~:~::~~~, ~:~:~r-a-;; –iMaintenance, Repair and Overhaul (MRO) : Maintenance (IRM) : , 1 • IVIRO and IRM refer to the actions involved in preserving or restoring facilities and equipment to a state in which they can perform their required functions as effectively and efficiently as po’ssible. The term IVIRO is commonly used for rotating equipment as parts of the equipment can be taken apart for overhaul. The overhaul of any equipment requires the entire equipment to be stripped to its parts and components for cleaning, repair, refurbishment, replacement and recalibration,
• Meanwhile, the term IRM is commonly used for static equipment and structures as most of the static equipment and structures, particularly in the energy industry, would require undergoing routine inspection to comply with regulations and standards as well as to detect and locate faults and impending problems before they result in harmful incidences affecting lives, properties and the environment. For example, in Malaysia, according to the Factories and Machinery Act 1967, it is compulsory for manufacturing plants to undergo inspection for its steam boilers and unfired pressure vessels every 15 to 21 months for the renewal of its Certificate of Fitness from the Department of Occupational Safety and Health (Source: Department of Occupational Safety and Health Malaysia).
• Serba Dinamik Holdings Group provides MRO of rotating equipment as well as IRM of static equipment and structures,

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8. INDUSTRY OVERVIEW (Cont’d) C VITAL FACTOR CONSULTING . Creating ‘Mnning Business Solutions ® 2.2 MRO of Rotating Equipment • Rotating equipment is a general classification of machinery and equipment that are designed to generate circular or reciprocating movement or motion, which is then used to move or agitate materials. Rotating equipment is also referred to as turbo machinery.
• Rotating equipment is divided into two main categories namely driver or prime mover and driven equipment. Drivers are equipment that consume or uses energy (i.e. fuel, thermal, kinetic or electricity energy) and convert them into mechanical energy. Drivers are categorised into two main types, namely mechanical and electrical. Some of the examples of drivers include the following:

Mechanical drivers Turbines are machines that convert kinetic energy from moving fluids such as water, gas, steam or wind into mechanical power via a rotor system; Engines are machines that use the energy from combustion of fuel to produce movement. Electrical drivers • Electrical drivers are also known as electric motors and are typically rotating machines that convert electrical energy into mechanical power to produce motion. • Meanwhile, driven equipment uses the mechanical energy and produces other forms of energy such as potential, kinetic and electrical. Some of the examples of driven equipment include pumps, compressors, fans, blowers and generators. Pumps are designed to move liquids, gases or slurries, commonly through network of pipes. In the oil and gas industry, large pumps are required to move large volume of materials for transportation or processing purposes. Such large pumps will also require large drivers to provide the power to move the materials. Compressors are designed to reduce the volume of gases or air such that more of the materials may be contained within a given containment. Fans and blowers are designed to provide continuous flow of air or gas by rotating a number of blades that are connected to a central point. Generators are designed to convert mechanical energy into electrical energy. Power generators are commonly required to provide electricity to run an entire production or processing facility. Serba Oinamik Holdings Berhad Page 30f71 Industry Assessment 178 8. INDUSTRY OVERVIEW (Cont’d) OVITAL FACTOR CONSULTING Creating Wnning Business Solutions ®. • Rotating equipment works through a system of drivers, driven components, transmission device (equipment or components involved in the transfer of motion or energy from one machinery/equipment to the next, for example gears, clutches and couplings), and ancillary equipment and systems (for example inlet air system, fuel system, exhaust duct and piping system) in its application in various industries.
• Rotating equipment is typically packaged as a system for various industrial applications. The two most common applications are systems that provides mechanical movement (i.e. perform work) or generate electricity.
• Due to its extensive industrial applications, rotating equipment is used in virtually all industries, including oil and gas (upstream, midstream and downstream), power generation, mining, agriculture, manufacturing, transportation and construction. Rotating equipment is also used in commercial applications, including heating, ventilation, air-conditioning, escalators, elevators, and back-up power generation.

2.2.1 Service Providers of MRO of Rotating Equipment • Service providers in the MRO industry are divided into four categories as discussed below.
• Original Equipment Manufacturers (OEM) are companies who design and manufacture the equipment using proprietary technologies. OEM are usually protected by intellectual property rights for their design and technology. It is common for OEM to undertake MRO of their equipment during the warranty period, especially for gas and steam turbines and large engines, pumps and compressors. OEM also sometimes provide MRO services for other OEM’s equipment. Many of the OEM of rotating equipment, especially gas and steam turbines, are global conglomerates.
• Independent Service Providers (ISP) are companies that are able to service various brands, sizes or models of rotating equipment and are not tied to any particular OEM in terms of exclusivity. ISP includes global corporations with capabilities of handling a wide range of services for customers in various industrial sectors, to a local operation with limited capabilities. In some cases, there are ISP that would have joint venture agreements or alliances with OEM to bid for major maintenance projects.
• Authorised Service Providers (ASP) are companies that are appointed by the OEM to provide services for the OEM’s equipment. In some cases, the appointment may be exclusive for the specific equipment, brands, type of services and/or geographical locations. Most commonly, OEM will appoint an authorised service provider in locations which they do not have or have inadequate local presence. This will enable OEM to offer better coverage in their aftermarket services. Some ASP only work for one OEM, while some can also function as ISP to undertake maintenance of other brands of equipment.

Serba Dinamik Holdings Berhad Page 4of71 Industry Assessment 179 8. INDUSTRY OVERVIEW (Cont’d) C VITAL FACTOR CONSULTING Creating VVinning Business Solutions . ® • In-house service providers comprise companies with the expertise and capabilities to service their own plant equipment. In some cases, these in-house service providers would carry out the entire MRO services of the plant or they may collaborate with external parties such as OEM, ASP and ISP. Plant owners would typically rely on their in-house service providers for minor maintenance services, while they may depend on external parties for major and scheduled maintenance services such as plant turnaround and shutdown maintenance. 2.3 IRM of Static Equipment • Static equipment refers to equipment that forms part of a processing or manufacturing process but does not have any mechanical or moving parts. Some examples of static equipment include the following: Boilers are closed vessels that are designed for water to be heated by an external energy source, for example coal or gas, to generate steam. Steam boilers are usually used together with steam turbine to generate power. Some boilers are designed to heat water or oil such that heat may be transported to different locations for various purposes; Heat exchangers are equipment designed to transfer heat from a fluid to another fluid without them having direct contact; Pressure vessels are closed containers that are designed to hold liquids or gases at a sUbstantially higher pressure compared to atmospheric pressure; Columns are used to separate a mixture into two or more components, or to transfer a material from one phase to another phase; and Separators are used for the separation of solids, liquids and gases. • Static equipment used in the oil and gas industry are mainly used in the production and downstream segments including processing and refining, as well as manufacturing of petrochemicals. For power generation, the key static equipment is the boiler which is used to generate steam to drive a steam turbine. 2.3.1 Service Providers of IRM of Static Equipment • Service providers of IRM of static equipment operate somewhat differently from MRO service providers for rotating equipment.
• For large boilers, especially those used to generate high wattage power, commonly OEM or their ASP will insist that they undertake IRM during the warranty period. Thereafter, it is common for ISP or in-house service providers to take over the IRIVI function. For smaller industrial boilers, OEM do not commonly undertake IRIVI services.

Serba Dinamik Holdings Berhad Page 50f71 Industry Assessment 180 8. INDUSTRY OVERVIEW (Cant’d) A VITAL FACTOR CONSULTING Creating Winning Business Solutions ® • As for other static equipment like heat exchangers and pressure vessels, it is more common for ISP to provide IRM services. Many OEM of static equipment, with the exception of large boilers, would focus on manufacturing and not be involved in provision of IRM services. 2.4 IRM of Structures • Structures refer to other static objects that are not directly involved in the processing function, but are part of the overall plant facilities. Some examples of structures include the following: Piping systems, which comprise network of long cylindrical tubes that are designed to carry liquids, gases and slurries between two locations or two equipment; Pipe racks and truss, which are structures that hold piping system above the ground; Storage tanks, which are large steel containers designed to hold large amount of liquids or gases; and Skids, which are heavy duty metal structure used as a platform for holding industrial machinery or equipment for ease of transportation and hook-up to other equipment. • Most of the steel structures in the oil and gas industry are focused in downstream activities including refining, processing and manufacturing. In the upstream sector of the oil and gas industry, IRM of structures also covers the maintenance of topside steel structures and steel jackets for oil rigs and production platforms, as well as drilling rigs. 2.4.1 Service Providers of IRM of Structures • Service providers of IRM of structures are ISP. There are no OEM or ASP of structures. 2.5 Maintenance Strategy for Rotating and Static Equipment • Undertaking maintenance is essential in ensuring machinery and equipment can function optimally over its productive lifespan.
Corrective Preventive Predictive
Serba Oinamik Holdings Berhad Page 6 of 71 Industry Assessment 181 8. INDUSTRY OVERVIEW (Cont’d) O VITAL FACTOR CONSULTING . .creating Vllinning Business Solutions ® • Corrective maintenance is carried out only when an irregularity or fault is detected, and is commonly known as repair. Once a fault is detected, corrective maintenance is carried out to restore the equipment to its normal operating conditions. This type of maintenance is more cost-effective when repairs are only undertaken when there are faults. This maintenance includes the restoration of production, repair of equipment and replacement of spare parts.
• Preventive maintenance, also known as planned or scheduled maintenance, is carried out at predetermined intervals or according to prescribed criteria, usually based on recommendations from the OEM. The primary objective of preventive maintenance is to reduce and mitigate the risk of performance deterioration or failure before it occurs. Preventive maintenance can be planned based on equipment running hours, or based on regular time intervals. This method is easier for planning, and maintenance costs are distributed more evenly over time. Nevertheless, the use of machinery could be sUb-optimal, and undergoing unnecessary and frequent part changes could lead to higher costs in the long run.
• Predictive maintenance, also known as condition-based monitoring (CBM), is based on performance monitoring, where condition of the equipment is assessed and indicators are used to rationalise the need for corrective or preventive actions to be carried out. Maintenance is typically only performed once signals indicate potential equipment failure or deterioration of performance. Predictive maintenance typically utilises real-time data or information measured at regular intervals and in different parts of the equipment. As such, this proactive maintenance schedule allows preventive and corrective actions to be carried out only when necessary. This would normally result in time and cost savings, as well as improved reliability of equipment performance. Nevertheless, initial installation cost for instrumentation and information systems can be costly, and maintenance period and frequency could be unpredictable.
• Plant turnaround maintenance, also known as shutdown maintenance, is a fundamental maintenance activity in capital intensive industries such as the energy industry. Plant turnaround maintenance involves a pre-planned and scheduled plant shutdown which is conducted at regular intervals. Generally, to take advantage of the plant shutdown, all the above mentioned maintenance strategies (i.e. corrective, preventive and predictive maintenance) would be undertaken during the shutdown period. The frequency of a plant turnaround, which ranges from twice a year to once in every five years or more, is driven by factors such as plant technology, level of importance of plant assets, and statutory requirements. Maintenance services that cannot be performed when the plant is operational are usually carried out during the shutdown period. Shutdown period generally lasts for a week or up to a month and requires large manpower resources that include engineers, technicians, craftsmen, skilled and specialist maintenance contractors.
• Serba Dinamik Holdings Group carries out all types of maintenance strategy and provides specialised maintenance services during plant turnaround maintenance namely MRO of rotating equipment and IRM of static equipment and structures.

Serba Dinamik Holdings Berhad Page 7of71 Industry Assessment 182 8. INDUSTRY OVERVIEW (Cont’d)
OVERVIEW OF ENERGY INDUSTRY • The energy industry covers the entire value chain from mining or extraction of fuels, harnessing of natural forces and energies, and conversion to power or electricity.
Harnessing of  Extraction and  natural forces and  processing of  energy sources  stored energy  1——­ ——–1  I  I  I  I  I ,  I I  I  I  I  I  J  J  I  I  J  I  I  I  J  I  J  I  I  I  I  I  I  I  I  I  I  I  I  I  J  I  I  I  IL  IJ  and gas, and  Within the power generation Industry, the Group

•  The most commonly used renewable energy sources are solar, wind and hydro. With the exception of hydro, currently many renewable energy sources are not cost competitive or not efficient in generating large quantity of power compared to fossil and nuclear fuels.  •  Fossil fuels are combustible deposits that are formed over long periods of time from the remains of living organisms. Fossil fuels release heat energy when they are burned, or create a strong force when combusted. On the other hand, nuclear fuels are substances that release energy when going through nuclear fission. Such energy is used to heat water to run steam turbines to generate power.  •  Power generation plants utilise various sources of energy and convert them into electric power, which is then connected to a national grid system for onward transmission and distribution to industrial, commercial, institutional, amenities and consumer usage for a wide range of applications. Alternatively, power can be generated for a specific area or uses without going through the national grid.  •  Serba Dinamik Holdings Group provides services to the oil and gas, and power generation industries within the overall energy industry.
Serba Dinamik Holdings Berhad Page 80(71 Industry Assessment 183 8. INDUSTRY OVERVIEW (Cont’d) C VITAL FACTOR CONSULTING .’ ®Creating Winning Business Solutions Oil and Gas Industry 3.1.1 Overview • Oil and gas serve as essential sources of energy. They include fuels such as petrol, diesel, kerosene, liquefied natural gas (LNG) and liquefied petroleum gas (LPG), which are used for various applications including automotive, aviation, general cooking, and for industrial and commercial purposes. Oil and gas also serve as input for manufacturing of petrochemical products, including fertilisers and many of the plastic products used in everyday lives. The oil and gas industry is generally segmented into upstream, midstream and downstream sectors, as follows: Upstream Transportation Pipeline & Ship
Transportation
“——~–.j Pipeline
l1li Serba Dinamik Holdings Group provides maintenance services to these operations in the upstream anddownstreamsector ofthe 011andgasindustry LNG = Liquefied Natural Gas; CNG = Compressed Natural Gas • The upstream sector comprises exploration, appraisal, development and production activities. Exploration refers to investigating a specific area to determine existence and assess characteristics of oil and gas deposits. Exploration activities also include appraisal, which is concerned with determining the economic and technical viability of discovered oil and gas deposits. Development activities are carried out to bring an untapped economically viable oil and gas reserve into production or significantly expanding an existing production facility. Production activities are those that are related to the extraction of oil and gas from identified and developed reserves.
• The midstream sector is mainly concerned with transportation of extracted oil and gas from production facilities to refineries and processing facilities. This mainly includes operation of onshore and offshore oil and gas pipelines, transport vessels, as well as storage tanks.

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8. INDUSTRY OVERVIEW (Cont’d) O VITAL FACTOR CONSULTING ®Creating \I\IInning Business Solutions • The downstream sector is mainly concerned with refining and processing of oil and gas, manufacturing of petrochemical products, and distribution activities. Refining and processing convert extracted oil and gas into forms and products that can be used by intermediate and final users. Refining of crude oil involves fractional distillation to separate the different constituents to produce refined petroleum products. Meanwhile, natural gas processing involves the separation and purification of petroleum gases, and liquefaction and compression of natural and petroleum gases to facilitate storage, transportation and usage. Petrochemical manufacturing utilises feedstock from refineries and gas processing plants to produce basic raw materials for further manufacturing, or usable end­products. Distribution activities are related to the delivery of refined and treated oil and gas products, and petrochemicals to the markets. This includes operation of LNG and LPG vessels, clean and dirty petroleum product tankers, petroleum tanker trucks, domestic gas networks and retail petrol stations.
• Serba Dinamik Holdings Group provides maintenance services for the following main types of rotating and static equipment used in the production activities and downstream sectors of the oil and gas industry:

Rotating equipment gas turbine; steam turbine; engine; motor; pump; compressor; industrial fan. Static equipment boiler; pressure vessel; column; reactor; heat exchanger; separator. 3.1.2 Rotating and Static Equipment Used in Production of Oil and Gas Industry • There are different types of rotating and static equipment used in the production of oil and gas.
• Rotating Equipment

Pumps are mainly used to extract and transfer crude oil. In oil fields, pumps that are used for extraction may include pumping or injecting water and other fluids into the well reservoir to increase the pressure of well fluids (i.e. mixture of oil, gas and water) from the ground to come up to the surface. Pumps are also used to transfer or move crude oil after it has been extracted from the ground into storage facilities, processing plant or shipping points. In upstream production facility, particularly in an offshore platform, pumps are also used to lift seawater for the purpose of cooling down the equipment and for fire fighting during emergency. Serba Dinamik Holdings Berhad Page 10 of71 Industry Assessment 185

8. INDUSTRY OVERVIEW (Cont’d) C VITAL FACTOR CONSULTING Creating VVinning Business Solutions ® Compressors are used to extract crude oil, move or store natural gas. In oil fields, compressors are used to re-inject associated petroleum gas, or sometimes air, into the well to increase the pressure of well fluids. Meanwhile, in natural gas fields, compressors are required to maintain or increase the gas flow up to the surface. Once the gas flows up to the surface, compressors are used to adjust the gas pressure and flow from the well to the gas processing or dehydration system, and finally flow out to the gas pipeline for transportation. Power generation equipment is used to generate electricity to operate facilities, machinery and equipment. In the production sector, power is used to run various electrical and electronic systems, equipment, tools and instrumentation. Power is also required for general use in electrical equipment and appliances for human habitation and working conditions within the production area. Many of the power generation equipment used for production in the upstream sector, and refining, processing and manufacturing sectors of the oil and gas industry requires very large power generation equipment including the use of gas and steam turbines and diesel engines. Offshore production platforms are required to be self­sufficient in power generation for their operations as well as habitation. Drivers including gas and steam turbines, and engines are the main power sources used to drive pumps, compressors and power generation equipment. • Static Equipment Columns, boilers, reactors and heat exchangers are used in a natural gas dehydration system or glycol dehydration unit to remove water vapour from raw natural gas extracted directly from well reservoir. The removal of water from natural gas is required prior to transportation via pipeline to avoid any corrosion or damage to the gas pipeline. Separators, surge tanks and heat exchangers are used for the separation of oil, gas and water from the total fluid stream produced by a well. 3.1.3 Rotating and Static Equipment Used in Downstream Oil and Gas Industry • Some of the rotating and static equipment that are used in the downstream sector of the oil and gas industry are as follows: Rotating Equipment Pumps are used to transfer/move any fluid including crude oil, refined petroleum, and petrochemicals from processes to processes within the plant, as well as to storage facilities. Serba Dinamik Holdings Berhad Page 11 0(71 Industry Assessment 186 8. INDUSTRY OVERVIEW (Cont’d) VITAL FACTOR CONSULTING OCreating Winning Business Solutions ® Compressors are used extensively in refineries, gas processing plants, LNG liquefaction plants, LNG regasification plant and petrochemical plants as well as in transportation and distribution of gas. For transportation and distribution of natural gas to the consumer market, gas compressor stations are installed along the pipeline distribution network to increase the pressure of the gas and to push the natural gas along the pipe to its destinations. Power generation equipment to provide power for production facilities within the plant. In the downstream sector, power is used to run various electrical and electronic systems, equipment, tools and instrumentation. Drivers including gas and steam turbines, and engines are the main power sources used to drive pumps, compressors and power generation equipment. Static Equipment Pressure and unpressurised vessels, columns, separators, boilers, reactors and heat exchangers are essential equipment used in downstream processes of the oil and gas industry. These processes include, among others, distillation in refineries, steam cracking in petrochemical plants, and liquefaction in LNG liquefaction plant. 3.2 Power Generation Industry 3.2.1 Segmentation of Power Producers • There are three broad categories of power producers as depicted in the diagram.

• Power producers for the utility market typically supply to the national grid for usage by industries, commerce, community and the general population. Power producers for captive market are focused on producing power for an isolated or standalone group of users that are not connected to the national grid or chose not to rely solely on the national grid. Captive markets could include small islands, rural areas and industrial parks supporting a relatively small population of users. There are also power producers that generate power for their private use including energy intensive processing and manufacturing plants, offshore oil and gas production platforms, large ships and mining operations.

 

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8. INDUSTRY OVERVIEW (Cant’d) C. 3.2.2
VITAL FACTOR CONSULTING Creating Winning l3usiness Solutions ® • The size of a power generation plant is based on its installed capacity measured in megawatts (MW). Large power producers commonly have plants with installed capacity in excess of 100 MW up to 2,000 MW. Such large power producers would commonly transmit their electric power to the national grid or transmit part of it directly to heavy power users. These types of power producers are either government, government linked bodies or private enterprises commonly referred to as independent power producers (IPP).
• There are also a group of small power producers with capacity ranging between 1 MW and 10 MW. Many of these installations are for direct industrial and commercial use, and any excess would be passed on to the national grid. Some are also specifically designed to sell their power to the national grid. There are even a larger group of power producers each with less than 1 MW capacity. Again such entities commonly produce for their own use and any excess would go to the national grid.
• Most power plants in excess of 10 MW uses gas or steam turbines while a small proportion would use hydro turbines. Smaller capacity power generation plants could use diesel engines, microturbines or small hydro turbines.
• Serba Dinamik Holdings Group undertakes maintenance of rotating equipment, and static equipment and structures for the utility, captive and private use segments of the power generation industry. However, a large proportion of its asset maintenance services are focused on the private use segment, mainly in the production and downstream sectors of the 011 and gas industry.

Licensed Power Producers in Malaysia • All power producers in Malaysia are required to be licensed by Energy Commission Malaysia with approval of the Ministry of Energy, Green Technology and Water.
• As at end of 2014 (latest available statistics), the number of power producers in Peninsular Malaysia was as follows:

Type of Licensees in Peninsular Malaysia  Number of Power Plants by Type of Fuel Source  Fossil Fuels  Hydro  Solar  Bio and processed waste I Bio and landfill gas  Industrial Process Waste heat  Tenaga Nasional Berhad  8(1)  3  – – – IPP  19(2)  1  – – – Renewable Energy  – 4  142  19(3)  – Private License Co-Generation  12(4)  – – 2(4)  2(4)  Public License Co-Generation  9(5)  – – – 4(5)  Less than 5 MW self-generation  1,815 (mainly biowaste)
Serba Dinamik Holdings Berhad Page 130(71 Industry Assessment 188 8. INDUSTRY OVERVIEW (Cont’d) O VITAL FACTOR CONSULTING . Creating Winning Business Solutions @ Notes: (1) Combined cycle, open cycle and thermal (gas and steam turbines) using natural gas and oil. Each power plant has an installed capacity ranging from 210 MW to 1,411 MW.
(2) Combined cycle, open cycle and thermal (gas and steam turbine) using natural gas, oil and coal. Each power plant with installed capacity ranging from 322 MW to 2,100 MW.
(3) Uses gas and steam turbine. Each power plant with licensed capacity ranging from 0.5 MW to
13.5 MW.
(4) Uses gas and steam turbine. Each power plant with installed capacity ranging from 6.5 MW to 43 MW.
(5) Uses gas and steam turbine. Each power plant with licensed capacity ranging from 6 MW to 418 MW.

(Source: Energy Commission, Malaysia) • As at end of 2014 (latest available statistics), the number of power producers in the Sabah were as follows: Type of Licensees in Sabah  Number of Power Plants by Type of Fuel Source  Fossil Fuels  Hydro  Solar  Bio and processed waste I Bio and landfill gas  Sabah Electricity Sdn Bhd  13(1)  4  – – IPP  8 (2)  – – – Renewable Energy  – 2  3  4 (3)  Private License Co-Generation  – – – 3 (4)  Public License Co-Generation  1(5)  – – 7  Less than 5 MW self-generation  925 (mainly biowaste)
Notes: (1) Comprised one combined cycle plant (gas and steam turbine) with installed capacity of 105 MW using natural gas. The remaining were diesel engine plants ranging from 6 MW to 64 MW.
(2) Comprised five combined cycle (gas and steam turbine) and three diesel engine plants. Each power plant with installed capacity ranging from 38 MW to 285 MW.
(3) Uses steam turbine. Each power plant with licensed capacity ranging from 11.5 MW to 14 MW.
(4) Uses steam turbine. Licensed capacity was 7.5 MW, 6.5 MW and 79.5 MW.
(5) Uses gas turbine with licensed capacity of 41.8 MW.

(Source: Energy Commission, Malaysia) • In Sabah, IPP have more large power producing plants compared to other types of licensees. Sabah also has relatively more power producing plants using diesel engines compared to Peninsular Malaysia. Serba Dinamik Holdings Berhad Page 14 of71 Industry Assessment 189 8. INDUSTRY OVERVIEW (Cant’d) C VITAL FACTOR CONSULTING creating Ifv’inning Business Solutions ®..
• As at end of 2014 (latest available statistics), the number of large power producers in Sarawak were as follows: Type of Licensees  Number of Power Plants by Type of Fuel Source  in Sarawak  Fossil Fuels  Hvdro  Sarawak Energy Berhad  6(1)  1  IPP  1
There were no information available for Renewable Energy, Private License Co-Generation and Public License Co-Generation licensees in Sarawak, Malaysia. Note: 1) Combined cycle, open cycle and thermal (gas and steam turbine) using natural gas, oil and coal. Each power plant with installed capacity ranging from 79 MW to 317 MW. 3.2.3 Maintenance of Power Generation Equipment • The provision of MRO of rotating equipment services for power generation focuses on power plants that use fossil fuels, bio and processed waste, and bio and landfill gas as fuel source. Such fuels will need to use either, gas turbine, steam turbine, diesel engine or combined gas and steam turbine to generate power.
• The provision of IRM of static equipment services for power generation focuses on power plants that use boilers to produce steam to run steam turbines. In combined cycle or cogeneration plants, gas turbines are used in combination with steam turbines. A heat recovery steam generator (HRSG -a type of boiler) is used to recover the exhaust heat from the gas turbine to heat up water in the HRSG to generate steam to run the steam turbines. Steam turbines can also use standalone boilers where fuel, such as coal, is used directly to heat up the water to generate steam.
• In power generation, I\IIRO of rotating equipment is focused on gas and steam turbines, and diesel engines, while IRM of static equipment is focused on boilers that generate steam to run turbines.
• Serba Dinamik Holdings Group’s MRO of rotating equipment is focused on gas and steam turbines, and diesel engines that are used in power generation. In addition, the Group is a distributor of microturbines and as such, it also provides MRO services of microturbines. Serba Dinamik Holdings Group’s IRM of static equipment is focused on boilers which are used to generate steam for steam turbines.

Serba Dinamik Holdings Berhad Page 15 of71 Industry Assessment 190
8. INDUSTRY OVERVIEW (Cont’d)
4 OVERVIEW OF GLOBAL AND REGIONAL ENERGY INDUSTRY 4.1 Global Energy Demand • Demand for energy will drive investments in the exploration, development, production and refining of fossil fuels as well as other energy sources, which in turn will stimulate demand on maintenance of assets used for such activities.
• Global energy demand has more than doubled over the past 50 years driven by developing economies such as China and India. Historically, hydrocarbon resources have been the main source of fuel for energy consumption representing more than half of the global demand. This is followed by coal, hydroelectric, nuclear and other renewable energy such as wind and solar.

Primary Energy Consumption by Region Primary Energy Consumption by Fuel Type (2005-2015) (1990-2015)
” Includes oil, biofuels, gas to liquids and coal to liquids; # Includes wind power, solar electricity and other renewables; CAGR =Compound annual growth rate Notes: Africa =Algeria, Angola, Benin, Botswana, British Indian Ocean Territory, Burkina Faso, Burundi, Cameroon (United Republic of), Cape Verde, .Central African Republic, Chad, Comoros, Congo (Republic of the), Congo (Democratic Republic of the), Djibouti, Egypt, Equatorial Guinea, Eritrea, Ethiopia, Gabon, Gambia (The), Ghana, Guinea, Guinea-Bissau, Cote d’ivoire, Kenya, Lesotho, Liberia, Libya, Madagascar, Malawi, Mali, Mauritania, Mauritius, Morocco, Mozambique, Namibia, Niger, Nigeria, Reunion, Rwanda, St Helena, Sao Tome and Principe, Senegal, Seychelles, Sierra Leone, Somalia, South Africa, Sudan, Swaziland, Tanzania, Togo, Tunisia, Uganda, Western Sahara, Zambia and Zimbabwe. Asia & Pacific = Afghanistan, American Samoa, Antarctica, Australia, Bangladesh, Bhutan, Brunei, Cambodia, Canton and Enderbury Islands, China, China Hong Kong Special Administrative Region (SAR), China Macau SAR, Chinese Taipei, Christmas Island, Cocos (Keeling) Islands, Cook Islands, Fiji, French Polynesia, Guam, India, Indonesia, Japan, Johnston Island, Kiribati, Korea (Democratic People’s Republic of), Korea (Republic of), Lao People’s Democratic Republic, Malaysia, Maldives, Midway Islands, Mongolia, 2005 2007 2009 2011 2013 2015 • Africa (CAGR: 2.8%) flIMiddle East (CAGR : 4.5%) I!1l Europe & Eurasia (CAGR: -0.5%) IIIThe Americas (CAGR: 0.4%) .Asla & Pacific (CAGR: 4.0%) III Renewables # (CAGR: 10.7%) • Hydro (CAGR: 2.4%) rnNuclear (CAGR: 1.0%) I1!Coal (CAGR: 2.2%) IlJ Natural Gas (CAGR : 2.3%) .OilA (CAGR: 1.3%) Serba Dinamik Holdings Berhad Page 160(71 Industry Assessment 191 8. INDUSTRY OVERVIEW (Cont’d) OVITAL FACTOR CONSULTING • .®”””‘tl”, “””,,”go,,,,,”,,.,”‘_ Myanmar, Nauru, Nepal, New Caledonia, New Zealand, Niue, Norfolk Island, Pacific Islands (Trust Territory), Pakistan, Papua New Guinea, Philippines, Pitcairn Island, Samoa, Singapore, Solomon Islands, Sri Lanka, Thailand, Tokelau, Tonga, Tuvalu, Vanuatu, Vietnam, Wake Island, Wallis and Futuna Islands.
Europe & Eurasia =Albania, Armenia, Azerbaijan, Belarus, Bulgaria, Czech Republic, Estonia, Georgia, Hungary, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Moldova, Poland, Romania, Russia, Slovakia, Tajikistan, Turkmenistan, Ukraine, Uzbekistan, Austria, Belgium (including Luxembourg), Cyprus, Denmark (including Faroe Islands), Finland, France (including Andorra and Monaco), Germany, Gibraltar, Greece, Iceland, Ireland, Italy (including San Marino and the Holy See), Malta, Netherlands, Norway (including Svalbard and Jan Mayen Islands), Portugal, Spain (including Canary Islands), Sweden, Switzerland (including Liechtenstein), Turkey, United Kingdom, Bosnia and Herzegovina, Croatia, Macedonia, Serbia and Montenegro and Slovenia.
Middle East = Bahrain, Islamic Republic of Iran, Iraq, Jordan, Kuwait, Lebanon, Oman, Qatar, Kingdom of Saudi Arabia, Syrian Arab Republic, United Arab Emirates, Yemen and other Middle East. The Americas =Canada, Greenland, St Pierre and Miquelon, United States, Antigua, Argentina, Bahamas, Barbados, Belize, Bermuda, Bolivia, Brazil, British Virgin Islands, Cayman Islands, Chile, Colombia, Costa Rica, Cuba, Dominica, Dominican Republic, Ecuador, EI Salvador, Falkland Islands (Malvinas), French Guiana, Grenada, Guadeloupe, Guatemala, Guyana, Haiti, Honduras, Jamaica, Martinique, MeXico, Montserrat, Netherlands Antilles, Nicaragua, Panama (including Panama Canal Zone), Paraguay, Peru, Puerto Rico, St Kitts-Nevis-Anguilla, St Lucia, St Vincent, Suriname, Trinidad & Tobago, Turks and Caicos Islands, United States Virgin Islands, Uruguay and Venezuela.
(Source: Vital Factor analysis) •  Primary  energy  is  any  source  of  energy  that  has  not  been  converted  or  transformed.  They include non-renewable sources such as fossil fuels comprising  oil, gas and coal, and mineral fuels like uranium, and renewable sources inclUding  solar, wind, hydro, tidal, biomass and geothermal.  •  The  global primary  energy  consumption  amounted  to  13.1  billion  tonnes  oil  equivalent in 2015.  The largest energy demand came from the Asia and Pacific  region  with  41.8%  of the  global primary energy consumption  of which  China  consumed  more  than  half of the  region’s  demand.  Being  the world’s  most  populous country with a fast growing economy, China has become the largest  energy consumer globally since 2009, surpassing the United States (US).  The  Americas,  and  Europe and  Eurasia accounted for 26.6% and 21.6% of global  primary energy consumption respectively in 2015.  However, demand in these  regions  has  slowed  down,  or  in  Europe  and  Eurasia’s  case,  demand  was  declining.  •  Following  China,  the  US  is  the  second  largest  consumer  of  energy  with  consumption approximately 2.3 billion tonnes of oil equivalent in 2015.  Although  The Americas region recorded  an  average increase of 0.4% per year between  2005 and 2015, the US recorded a slight average contraction of 0.3% per year  during the  same  period.  One of the factors which may have led to the slight  decline in primary energy consumption in the US is due to the country’s early
Serba Dinamik Holdings Berhad Page 17 of71 Industry Assessment 192 8. INDUSTRY OVERVIEW (Cant’d) O VITAL FACTOR CONSULTING •. ® C’~”” “,””m, B””~, So_”” adoption of energy efficient programmes that may have started to catch on. This was coupled with several other factors including warmer weather, changes in economic conditions and electricity prices, among others. Meanwhile, Europe and Eurasia’s declining primary energy demand was largely due to the impact of the global financial crisis in 2008/2009 that affected majority of the countries’ economies in the region. • In terms of countries, China and the US play the biggest roles in the demand for primary energy, while Asia and Pacific, and the Americas are the two largest consuming regions of primary energy. As such, economic and social developments in these geographic areas are key determinants to the overall demand for primary energy. 4.2 Global Oil and Gas Demand • Fossil fuels, especially oil and gas, represent the highest proportion of primary energy source. As such, demand for oil and gas has a direct and significant impact on meeting the energy needs of all nations.
• With the increasing world oil and gas demand, oil and gas producers would have to continuingly sustain production to meet the demand. This in turn would drive the need for maintenance of assets used in the oil and gas industry to ensure production facilities are running productively, efficiently and cost effectively.

Oil Consumption by Region 100
Note: Oil consumption is measured as deliveries from refineries and primary stocks, comprises inland deliveries, international marine bunkers, refinery fuel, crude for direct burning, oil from non-conventional sources and other sources of supply. (Source: Vital Factor analysis) Serba Dinamik Holdings Berhad Page 18 of71 Industry Assessment 193 4  • Africa  (CAGR: 4.8%)  £lI Middle East  {CAGR: 5.8%)  Itil Asia & Pacific  (CAGR: 5.5%)  1m Europe & Eurasia  {CAGR: -0.9%)  • The Americas  {CAGR:2.3%)  o  2005  2007  2009  2011  2013  2015
8. INDUSTRY OVERVIEW (Cont’d) C VITAL FACTOR CONSULTING . . .Creating Vvlnning Business Splutions ® • In 2015, global demand for oil amounted to 94.8 million barrels per day (bbl/d), an increase of 1.6 million bbl/d or 1.8% from the previous year. It is one of the largest increases in recent years attributed, to a large extent, by the low crude oil prices in 2015. In 2015, the largest demand for oil came from Asia and Pacific, and The Americas representing 33.7% and 32.9% of global oil consumption respectively. The US was the largest global consumer of oil which accounted for 20.5% of global oil consumption while China was the largest consumer of oil in the Asia and Pacific region, which accounted for 12.1 % of global oil consumption.
• Over the past decade, demand for oil in the Asia and Pacific region was largely driven by the two largest economies in the region namely China and India. The growth in the Asia and Pacific region’s oil demand can be traced to economic growth, expansion in industrial activity, growth in urban populations, and increasing demand for transportation fuel.
• Demand for oil in The Americas region is almost stagnant with a near zero growth. The US, being the largest consumer in the region, registered a slight contraction in oil demand over the period of 2005 and 2015. Approximately three quarter of the oil demand in the US is used for its transportation sector and the decline in demand was partially due to the rise in fuel efficiency vehicles as well as a reduction in the number of miles driven by the Americans.
• Meanwhile, Middle East is one of the fastest growing regions for oil consumption over the last decade as its population, urbanisation and economic growth stimulated the increase in fuel demand. Being the largest global producer and net exporter of oil, the region has benefited in terms of strong economic growth driving the growth of their own internal energy consumption. Additionally, oil subsidies also encourage increased oil consumption during this period.

Natural Gas Consumption by Region Note: Natural gas consumption excludes natural gas converted to liquid fuels but includes derivatives of coal as well as natural gas consumed in gas-to-liquids transformation. (Source: Vital Factor analysis) Serba Dinamik Holdings Berhad Page 19 of71 Industry Assessment 194 8. INDUSTRY OVERVIEW (Cont’d) O VITAL FACTOR CONSULTING Creating VVinning Business Solutions ® • In 2015, global natural gas consumption amounted to 3.5 trillion standard cubic metres which represented approximately 24% of the global primary energy consumption. The Americas, and Europe and Eurasia regions were the largest consumers of natural gas which represented 32.8% and 28.9% of the global natural gas consumption respectively. The US and Russia were the largest and second largest consumers of natural gas accounting for 22.4% and 11.3% of global natural gas consumption respectively.
• Compared to oil demand, the demand for gas in the US grew steadily at an average rate of 2.2% per year over the period of 2005 and 2015 which was mainly driven by the increased usage in the power generation industry. In 2015, approximately one third of the US’ natural gas consumption was used for power generation compared to approximately one quarter ten years before.
• The robust growth of the overall global gas consumption was mainly driven by Asia and Pacific, and the Middle East regions where demand grew at compound annual growth rate (CAGR) of 5.5% and 5.8% respectively. China and Japan was the two main contributors to the growth in gas demand in Asia and Pacific regions between 2005 and 2015. Although coal is the main source of fuel for China’s electricity generation, the country has been attempting to replace it with natural gas as fuel source due to rising emission concerns. Meanwhile, Japan has turned to natural gas as fuel source for electricity generation following the Fukushima Daiichi nuclear disaster in 2011.
• Similarly to oil demand, the gas demand in the Middle East was also driven by its fast growing economy, population growth and urbanization coupled with gas subsidies. Additionally, some of the Middle Eastern countries expanded their petrochemical industry rapidly. This resulted in the increased demand for gas, as gas is used as feedstock for the petrochemical industry.

MACROECONOMIC AND SOCIOECONOMIC INDICATORS • Energy, in the form of oil and gas, and power is a key driver of economies, and an essential component of everyday living. Energy is used in all industries and commerce to perform and facilitate work, and to process and manufacture goods and products. Energy is also essential in society where its uses range from transportation to powering electrical and electronic devices that has become a necessity in everyday living.
• In addition, oil and gas are raw materials used in the manufacturing of many products including fertilises, polymers (for example plastics), elastomers (for example synthetic rubber) and industrial chemicals.

Serba Dinamik Holdings Berhad Page 20 0(71 Industry Assessment 195 8. INDUSTRY OVERVIEW (Cont’d) O VlTAL FACTOR CONSULTING …. .. ® Creating Winning Business Solutions • As such, the development and growth of economies and societies play key roles in increasing demand for energy and products derived from oil and gas. Increasing demand for energy and petrochemical products will drive investments in exploration, development, production and refining of oil and gas, as well as manufacturing of petrochemical products.
• This section discusses economic and socioeconomic performance of the world as a whole, selected major regions and countries, namely the US, China, European Union (EU), Emerging and Developing Asia, and the Middle East and North Africa. Some countries, especially China and the US, or regions, especially Asia and Pacific, and the Americas, contribute substantially more than other countries and regions. As such, the economic and socioeconomic performance of these countries and regions would have major impact on the overall energy industry. Serba Dinamik Holdings Group carries out a significant amount of work in Malaysia and in the Middle East, and as such performance in the Middle East and Emerging and Developing Asia regions will have a direct impact on the performance of the Group.

Gross Domestic Product (GOP) of Selected Regions and Countries • GOP is a measure of the gross value added in the output of goods and services in a country during a specified period of time. It provides an indication of the overall size of the country’s economy. GOP growth is commonly measured by comparing a particular year or quarter’s GOP with that of the preceding year or quarter. It is commonly expressed as a percentage, which may be positive (indicating that the value of GOP grew over time) or negative (indicating that the value of GOP declined over time).
• Real GOP is a method of measuring GOP that removes the effect of changes in the prices of goods and services over time (inflation or deflation). Thus, real GOP provides measure of actual changes in output of goods and services.

Real GOP Growth Rates 10.0 9.5 8.0 ~ –
l; 4.0 Do. C (,’) ;;; 2.0 8! 0.0
-0.4  -2.0  2011  2012  2013  2014  2015e  III Global  1111 US  mChina  .EU  1m Asia*  IDMENA
Serba Dinamik Holdings Berhad Page 210(71 Industry Assessment 196 8. INDUSTRY OVERVIEW (Cont’d) C VITAL FACTOR CONSULTING . Creating Winning Business Solutions ® e = estimate. Notes: EU = European Union. Comprises 28 countries, namely Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and United Kingdom. Asia* = Emerging and Developing Asia. Comprises 29 countries, namely Bangladesh, Bhutan, Brunei Darussalam, Cambodia, China, Fiji, India, Indonesia, Kiribati, Laos, Malaysia, Maldives, Marshall Islands, Micronesia, Mongolia, Myanmar, Nepal, Palau, Papua New Guinea, Philippines, Samoa, Solomon Islands, Sri Lanka, Thailand, Democratic Republic of Timor-Leste, Tonga, Tuvalu, Vanuatu and Vietnam. MENA = Middle East and North Africa. Comprises 20 countries, namely Algeria, Bahrain, Djibouti, Egypt, Iran, Iraq, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, Qatar, Kingdom of Saudi Arabia, Sudan, Syria, Tunisia, United Arab Emirates, and Yemen.
(Source: Vital Factor analysis) • The global economy has been growing at a slower pace since the global financial crisis and recession that occurred between 2007 and 2009. Some countries such as the EU countries are slowly recovering despite experiencing a contraction in their economy in 2012 by 0.4%. The slowdown of the global economy was driven by the realignment of major macroeconomics coupled with geopolitical tensions in some countries. The main driver of macroeconomic realignment was the moderation of China’s economic growth coupled with weak commodity prices. Lower oil prices affected the growth of some of the oil exporting countries while it supported household demand and lowered energy costs for oil importing countries.
• From an average of 10% growth from 2000 through 2010, China’s economic growth has decreased to a single-digit growth over the past five years as China’s economy transitioned to a more balanced growth following a decade of strong credit and investment growth. The moderated growth in China was contributed by slower manufacturing and trade activities coupled with the fall in property prices which affected the property sector in China -one of the key drivers of China’s growth for the past decade. Given the size of the Chinese economy, the slowdown caused a major spill-over to other economies through trade channels, weaker commodity prices and market confidence.
• Economic activity in the US had gained traction with real GDP growing from 1.6% in 2011 to 2.6% in 2015 while growth in the EU improved at a modest pace from ­0.4% in 2012 to 2.3% in 2015 due to unresolved structural constraints.
• Meanwhile, activities in the Emerging and Developing Asia remained robust with real GDP growth of 6.6% in 2015. Economic growth in the Emerging and Developing Asia was mainly supported by growth in China and India. India’s economy registered strong growth mainly driven by private consumption which has benefited from lower energy prices and rising real income.

Serba Dinamik Holdings Berhad Page 22 of71 Industry Assessment 197 8. INDUSTRY OVERVIEW (Cant’d) O VITAL FACTOR CONSULTING . . . Creating Winning Business Solutions ® • Economic growth in the MENA region grew at a slower rate as some of MENA’s economies rely heavily on oil export revenues including Bahrain, Oman, Qatar, Kingdom of Saudi Arabia (KSA) and the UAE. With the downturn in crude oil prices coupled with geopolitical tensions in Libya, Yemen, Iraq and Syria, economic growth in the MEI\lA region slowed down from 5.1 % in 2012 to 2.1 % in 2015. Despite the lower oil revenue generated in the MENA region, countries in the MENA region particularly in the Middle East still continued to produce crude oil with growth rate of 6.3% from 23.1 million bbl/d in 2014 to 24.5 million bbl/d in 2015. 5.2 Malaysia’s Gross Domestic Product • Malaysia is a key market for Serba Dinamik Holdings Group. As such, the economic performance of Malaysia will have a direct influence on the performance of Serba Dinamik Holdings Group. Malaysia’s Real GOP Growth 8.0 6.0 ‘0’ 6.0 ~ .c i 2 Cl 0. 4.0 Q Cl ~ 2.0 0.0 2011 2012 2013

p =preliminary; f =forecast (Source: Bank Negara Malaysia) • Overall, Malaysia’s key economic indicator, real GDP, grew at a CAGR of 5.3% between 2011 and 2015, with growth recorded every year during this period. Despite the challenging economic environment in 2015, real GDP grew by 5.0%, supported by the continued expansion of domestic demand. Domestic demand growth was stronger during the first quarter of 2015, partly due to consumers making purchases ahead of the implementation of the Goods and Services Tax (GST) in 2015. Although growth in domestic demand moderated during the second half of the year, modest improvement in external demand contributed to overall economic growth. Serba Dinamik Holdings Berhad Page 23 of71 Industry Assessment 198 8. INDUSTRY OVERVIEW (Cant’d) C VITAL FACTOR CONSULTING Creating Winning Business Solutions @ • Private consumption continued to expand but at a moderate pace due to the higher cost of living from the implementation of GST as well as the depreciation of the Malaysian Ringgit. Household spending was supported by the continued income growth, stable labour market conditions coupled with an increase in disposable incomes from lower fuel prices and reduction in individual income tax rates during 2015. These positive factors outweighed concerns about the increasing cost of living, and weak consumer sentiments.
• The Malaysian economy is forecasted to grow by 4.0 -4.5% in 2016 amidst a challenging international economic and financial landscape. Domestic demand is expected to be the main driver of growth in 2016 supported by private sector expenditure. Private consumption is expected to grow at a low rate mainly due to consumer’s adjustment to an environment of higher prices and greater uncertainties. Nevertheless, the moderated growth is expected to be partially offset by the continued growth in income and employment as well as support from Malaysian Government’s initiatives to enhance household disposable income.
• In the first half of 2016, the Malaysian economy expanded by 4.1 % which was a slight moderation as compared to the first half in 2015 of 5.3%. Growth was affected by the continued decline in net exports due to lower production in agriculture and manufactured products. Nevertheless, private sector spending remained the key driver of growth mainly supported by wage and employment growth. Additionally, improvements in business confidence, particularly in the second quarter of 2016, spurred private investments in the services and manufacturing sectors. On the supply side, all sectors registered growth during the first half of 2016, except the agricultural sector. Growth in the agricultural sector declined due to adverse weather conditions resulting in low palm oil yields. The mining sector improved with higher crude oil and natural gas production in Sabah. The construction sector growth was driven by petrochemical, transport, and utility-related projects as well as residential developments.
• For the third quarter of 2016, Malaysia’s real GDP increased by 4.3% driven mainly by growth in the private sector namely private consumption and investment. Private consumption expanded due to growth in wage and employment while private investment grew mainly through continued capital expenditure in the services and manufacturing sector. On the supply side, similar to the first half of 2016, all sectors registered growth with the exception of the agricultural sector due to adverse weather conditions. Mining sector expanded at a faster pace during the third quarter of 2016 driven by higher crude oil production, particularly in Sabah.

DEMAND AND SUPPLY CONDITIONS • Essentially, the demand and supply conditions for asset maintenance for the oil and gas, and power generation industries will depend on their performances which will serve as an indication for the asset maintenance industry. Serba Dinamik Holdings Berhad Page 24 of71 Industry Assessment 199 8. INDUSTRY OVERVIEW (Cant’d) O VITAL FACTOR CONSULTING Creating Winning Business Solutions ® • The demand and supply for maintenance services are dependent on the following: extraction and production activities in the upstream oil and gas industry; refining and processing in the downstream oil and gas industry; manufacturing of petrochemicals in the downstream oil and gas industry; installed capacity of the power generation plants and facilities.
• Oil and gas operators across the value chain of the industry are under constant pressure to maximise production, meet delivery schedules and optimise operating and maintenance costs while addressing concerns of rising emissions from the use of fossil fuels. Similarly, power plant operators also face the same challenges to meet the growing demand for electricity.
• In order to overcome these challenges, oil and gas, and power plant operators are increasingly adopting various asset maintenance strategies to help elevate performance and increase plant efficiencies while maintaining the integrity of their assets. Additionally, given the substantial capital investment in the oil and gas, and power generation industries, prolonging the life cycle of the assets would be crucial for operators to ensure adequate return on their investments.
• The level of demand and supply of maintenance services for the oil and gas, and

power generation industries can be measured by the following indicators: Production of oil and gas; Crude oil refinery installed capacity; LNG liquefaction and regasification installed capacity; and Electricity generation. Production of Oil and Gas • Growth in oil and gas production indicates a continuing effort to carry out production activities, which in turn creates the demand for maintenance of assets used for production of oil and gas. Additionally, the level of production of oil and gas would also indicate the level of demand for maintenance.
• Serba Dinamik Holdings Group undertakes maintenance including MRO of machinery and equipment in the production sector of the oil and gas industry. As such, performance of the production sector of the oil and gas industry will have an impact on the Group.
• Production of oil and gas requires various types of rotating equipment including: pumps required for extraction and movement of oil, and other fluids like water and chemicals; compressors to reduce the volume or increase the pressure of gas for transportation and storage of gas; turbines to generate power for use with electrical and electronic equipment, machinery, devices and appliances; and engines and motors to perform work.

Serba Dinamik Holdings Berhad Page 25 of71 Industry Assessment 200 8. INDUSTRY OVERVIEW (Cont’d) O VITAL FACTOR CONSULTINS Creating Winning Business Solutions ® 6.1.1 Global Oil Production • Global production of oil has been increasing between 2005 and 2015 at a CAGR of 1.3% mainly driven by the growth in oil production in non-OPEC countries. Growth was the highest in the US mainly driven by the boom of its shale oil production. Other non-OPEC countries such as Russia and China also recorded growth in oil production over the 10 year period. This was offset by slight decline in oil production in UK and Norway as some of the oil fields in the North Sea reaches its maturity. Global Oil Production (2005-2015) I!EIOPEC (CAGR: 1.1%) • Non-OPEC (CAGR: 1.4%)
Note: Oil production comprises crude oil, condensates, natural gas liquids, and oil from non-conventional sources. OPEC = Organisation of the Petroleum Exporting Countries, which as at 1 January 2016, comprises 13 member countries namely Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Kingdom of Saudi Arabia, the United Arab Emirates and Venezuela. All 13 countries were members of OPEC between 2005 and 2015 with the exception of Angola, Ecuador and Indonesia. 2005 and 2006 excludes Angola and Ecuador as they became members from 2007 onwards, while 2009 to 2015 excludes Indonesia as its membership was suspended in 2009 onwards and was only reactivated in 1 January 2016. Non-OPEC =all oil producing countries excluding members of OPEC at the point in time. (Source: Vital Factor analysis) • Meanwhile, growth in oil production in OPEC countries between 2005 and 2015 was largely driven by increased production in Iraq and KSA. This was offset by decline in oil production in Libya due to political instability as well as Iran which saw cuts of imports from their customers resulting from the tightening in US and European energy sanctions. Serba Oinamik Holdings Berhad Page 26 of71 Industry Assessment 201 8. INDUSTRY OVERVIEW (Cont’d) VITAL FACTOR CONSULTING O®””””” “””‘” Do…….S”.””
• In 2015, global oil production (comprising crude oil, condensates, natural gas liquids, and oil from non-conventional sources) amounted to approximately 96.4 million bbl/d. Approximately 60% of the global oil production were contributed by non-OPEC countries where the majority was from the US, Russia, Canada and China. The remaining 40% of global oil production was from OPEC countries where the majority of oil production came from KSA, Iraq, Iran, UAE, Kuwait, and Venezuela. 6.1.2 Oil Production in Malaysia, Qatar, UAE, Oman, Turkmenistan and Indonesia • For FYE 2015, Serba Dinamik Holdings Group’s revenue derived from Malaysia, Qatar, UAE, Oman, Turkmenistan and Indonesia were 34.64%, 18.16%, 14.00%, 12.67%, 11.86% and 6.02% respectively, representing a combined 97.35% of total revenue. The Group provides services to the production sector of the oil and gas industry in the above mentioned countries. As such, discussions on production activities are provided for the said countries. Oil Production in Countries where Serba Dinamik Holdings Group Derived Revenue in FYE 2015 lIIMalaysia (CAGR: 2.2%) mlQatar (CAGR: -2.8%) Iil UAE (CAGR: 3.6%) lIIOman (CAGR: 2.7%) Ii!ilTurkmenistan (CAGR: 4.4%) mJlndonesia (CAGR: -7.2%) 3
2011 2012 2013 2014 2015 Note: Oil production comprises crude oil, condensates, natural gas liquids, and oil from non-conventional sources. (Source: Vital Factor analysis)  •  Out of the six countries under discussion, the countries that had shown positive growth between 2011 and 2015 were Malaysia, UAE, Oman and Turkmenistan. In addition, oil production from these four countries grew faster than the combined OPEC and non-OPEC countries between 2011 and 2015.  •  In FYE 2015, UAE was the third largest revenue contributor for Serba Dinamik Holdings Group. In 2015, UAE produced 2.9 million barrels of oil per day, which represented approximately 3% of global supply (Source: Vital Factor analysis).
Serba Dinamik Holdings Berhad Page 27 of71 Industry Assessment 202 4  • Africa  (CAGR: 1.8%)  rn Asia & Pacific  (CAGR: 4.0%)  If:! Middle East  (CAGR: 6.8%)  mJ Europe & Eurasia  (CAGR: -0.3%)  • The Americas  (CAGR: 2.7%)  o  2005  2007  2009  2011  2013  2015
8. INDUSTRY OVERVIEW (Cont’d) C VITAL FACTOR CONSULTING Creating VVinning Business Solutions ® • Malaysia, being Serba Dinamik Holdings Group’s largest revenue contributor for FYE 2013, FYE 2014 and FYE 2015, experienced growth in the production of oil between 2011 and 2015, with the exception of a slight drop in 2013.
• In 2015, Malaysia’s production of oil represented approximately 0.7% of the global oil production. Following the commencement of crude oil production from the Gumusut-Kakap deepwater oilfield at offshore Sabah in 2014, Malaysia’s production of crude oil and condensates grew between 2011 and 2015. The Gumusut-Kakap field is expected to reach an annual peak oil production of approximately 135,000 bbl/d, contributing up to 25% of Malaysia’s oil output. The higher oil production in 2014 and 2015 was also driven by sound reservoir management and production enhancement effects in existing oil fields. Meanwhile, the slight drop in crude oil in 2013 was mainly due to the decrease in production from maturing fields coupled with scheduled shutdown of some production facilities for maintenance and reservoir management. (Source: Petroliam Nasional Berhad (PETRONAS))
• Continuing growth in the countries served by Serba Dinamik Holdings Group will augur well for the Group.

6.1.3 Global Gas Production Global Natural Gas Production (2005-2015) Note: Natural gas production excludes gas flared or recycled but it includes natural gas produced for gas-to-liquids transformation. (Source: Vital Factor analysis) Serba Dinamik Holdings Berhad Page 28 of71 Industry Assessment 203 8. INDUSTRY OVERVIEW (Cont’d) O VITAL FACTOR CONSULTING . Creating IJIilnning Business Solutions ® • Global natural gas production, on the other hand, increased steadily at a CAGR of 2.4% between 2005 and 2015 as all regions recorded growth. Highest growth was in the Middle East region contributed mainly by the increased production in Qatar and Iran with average growth per year of 14.8% and 6.5% respectively during the same period. This was followed by growth in natural gas production in the Asia and Pacific region supported mainly by China’s natural gas production which more than doubled since 2005. Meanwhile, growth of natural gas production in The Americas was largely contributed by the discovery of shale gas deposits in the US.
• In 2015, the world’s natural gas production totalled 3.5 trillion standard cubic metres. The Americas, and Europe and Eurasia region were the main natural gas producing regions, together accounting for approximately 60.8% of the total world production of natural gas in 2015. Within these regions, the US and Russia were the top gas producing countries representing approximately 21.7% and 16.2% respectively of the global gas production in 2015. This is followed by the Middle East region as the third natural gas producing region with Iran and Qatar being the third and fourth largest gas producing countries. In 2005, Qatar was only producing approximately 46 billion standard cubic metres of natural gas and ten years later, it has become the fourth largest gas producing countries with natural gas production of approximately 181 billion standard cubic metres, surpassing Canada, China, Norway and KSA.

6.1.4 Natural Gas Production in Malaysia, Qatar, UAE, Oman, Turkmenistan and Indonesia Natural Gas Production in Countries where Serba Dinamik Holdings Group Derived Revenue in FYE 2015 III Malaysia (CAGR: 2.4%) o Qatar (CAGR:5.7%) mUAE (CAGR: 1.6%) 1II0man (CAGR: 3.1%) IJilTurkmenistan (CAGR: 5.0%) CJ Indonesia (CAGR: -2.0%) 200 C .9§. 150 i :;; 100 :so’=’ u ~ 50 ‘C C !l II) o
2011 2012 2013 2014 2015 Note: Natural gas production excludes gas flared or recycled but it includes natural gas produced for gas-to-liquids transformation. (Source: Vital Factor analysis) Serba Dinamik Holdings Berhad Page 29 of71 Industry Assessment 204 8. INDUSTRY OVERVIEW (Cont’d) O VITAL FACTOR CONSULTING ® Creating VVinning Business Solutions • Between 2011 and 2015, Qatar achieved the highest gas production growth as well as having the highest gas production amount compared to the other five countries under discussion. In 2015, Qatar was the world’s largest exporter of LNG. In 2015, Qatar’s gas production amounted to 181 billion standard cubic metres, which represented approximately 5% of total world natural gas production. Qatar’s North Field is the world’s largest single concentration of non-associated natural gas, representing an estimated 10% of the world’s total known gas reserve. Qatar also has the world’s largest gas-to-liquid production facility (Source: Vital Factor analysis). • Qatar’s large gas reserve and growth in gas production would augur well for Serba Dinamik Group as Qatar was its second highest revenue contributing country amounting to 18.16% of total revenue for FYE 2015.
• Malaysia’s production of natural gas also recorded a growth between 2011 and 2015 largely due to several new gas fields that came on stream during the period including, among others, Damar gas field in Peninsular lVIalaysia and Laila gas field in Sarawak. Continuing growth in lVIalaysia’s production of gas will augur well for Serba Dinamik Holding Group as Malaysia was its highest revenue contributor by country for FYE 2013, FYE 2014 and FYE 2015.

6.2 Crude Oil Refinery Installed Capacity • Demand for maintenance services for the downstream oil and gas assets is directly related to the installed capacity of assets, including crude oil refineries. When they are operating, both existing and new assets will require maintenance to avoid costly breakdowns and loss of output, sustain safe and efficient operations, and to fulfil safety, other regulatory and environmental requirements.
• As such, the following maintenance services are commonly required for
downstream crude oil refining: MRO of rotating equipment like turbines, engines, motors, pumps, compressors and industrial fans; and IRM of static equipment and structures including process equipment like boilers and unfired pressure vessels, heat exchangers, columns, towers, separators, storage tanks and piping systems.
• Serba Dinamik Holdings Group provides MRO and IRM services to the downstream sectors of the oil and gas industry including crude oil refining. As such, a growing downstream sector of the oil and gas industry would augur well for the Group, especially in the countries that they provide services.

Serba Dinamik Holdings Berhad Page 30 of71 Industry Assessment 205 8. INDUSTRY OVERVIEW (Cont’d) O VITAL FACTOR CONSULTING Creating VVinning Business Solutions (S) 6.2.1 Global Crude Oil Refinery Global Crude Oil Refinery Capacity by Region
Note: Crude oil refinery capacity is based on atmospheric distillation capacity at year end on a calendar day basis. (Source: Vital Factor analysis) • All regions, except Europe and Eurasia, registered a growth in crude oil refinery capacity between 2011 and 2015. The US, within The Americas region, has the largest refinery capacity globally totalling 18.3 million bbl/d (or 18.8% of the global refinery capacity) in 2015. As of 1 January 2015, there were approximately 137 operating refineries in the US with the largest having a capacity of 603,000 bbl/d.
• In 2015, Asia and Pacific region has the largest crude oil refinery capacity mainly due to China, India, Japan and South Korea. China, with a total refinery capacity of 14.3 million bbl/d in 2015, has the second largest refinery capacity in the world. The two national oil companies, Sinopec and PetroChina/China National Petroleum Company, dominated the oil refinery sector in China with combined capacity of at least 70% of the country’s refining capacity.
• Europe and Eurasia region registered a slight declined in refinery capacity between 2011 and 2015 mainly due to shutting down of facilities in France, UK, Italy and Germany. The global economic downturn in 2008/2009 affected the refining sector in the EU region resulting to the closing of these refineries.
• The crude oil refining capacity in the Middle East region registered the fastest growth, with a CAGR of 3.6% between 2011 and 2015, compared to the other regions, albeit from a lower base. New refineries in KSA and the UAE contributed to the growth in capacity during the period. The growth in capacity in KSA was mainly due to the opening of Saudi Aramco’s refineries totalling approximately 800,OOObbi/d in Jubail and Yanbu in 2013 and 2014 respectively.

Serba Dinamik Holdings Berhad Page 31 of71 Industry Assessment 206 8. INDUSTRY OVERVIEW (Cont’d) O VITAL FACTOR CONSULliNG Creating Winning Business Solutions ® 6.2.2 Crude Oil Refineries in lVIalaysia, Qatar, UAE, Oman, Turkmenistan and Indonesia Crude Oil Refinery Capacity in Countries where Serba Dinamik Holdings Group Derived Revenue in FYE 2015 III Malaysia (CAGR: 0.5%) L’JJQatar (CAGR: 0.0%) mUAE (CAGR: 12.8%) III Oman (CAGR:O.O%) liiITurkmenistan (CAGR: 0.0%) fiJlndonesia (CAGR: 1.8%) 1,200 0 1,000 eo >0 800 I\”S C ~ 600 ~ 400 I\”S al 200 o
2011 2012 2013 2014 2015 Note: Crude oil refinery capacity is based on atmospheric distillation capacity at year end on a calendar day basis. (Source: Vital Factor analysis) • Between 2011 and 2015, UAE experienced the highest growth in crude oil refinery capacity compared to the other five countries under discussion. UAE was the third largest revenue contributor by country for Serba Dinamik Holdings Group in FYE 2015.
• Malaysia also has an active downstream oil and gas sector with refineries and petrochemical plants producing a range of petroleum and natural gas products, plastics, chemicals, fertilisers and other products for local consumption and export. Growth in the capacity of oil refineries in Malaysia would have a direct and positive flow-on effect on the demand for asset maintenance in the downstream sector of the oil and gas industry in Malaysia.
• The current refining facilities in Malaysia include two facilities located in Malacca and one facility located in Kerteh, Terengganu, both owned by Petroliam Nasional Berhad (PETRONAS). These refining facilities currently have a net total refining capacity of more than 440,000 bblld. Additionally, other refineries in Malaysia include Petron Malaysia Refining and Marketing Berhad’s refinery in Port Dickson, Shell refinery in Port Dickson and Kemaman Bitumen Company Sdn Bhd’s refinery in Kemaman. Shell is in the midst of selling their refinery in Port Dickson to a petrochemical company and the transaction is expected to complete by end of 2016.
• Serba Dinamik Holdings Group provides MRO and IRM services to the downstream crude oil refining sector of the oil and gas industry. As such, the number and size of such plants would be directly relevant to the business of the Group, especially in the countries that they provide MRO and IRM services.

Serba Dinamik Holdings Berhad Page 32 of71 Industry Assessment 207 8. INDUSTRY OVERVIEW (Cant’d) VITAL FACTOR CONSULTrNG OCreating Vvlnning Business Solutions ® • Provided below is a list of some of the crude oil refineries in some of the countries served by Serba Dinamik Holdings Group.
Petron Port Dickson  88  Shell Port Dickson  180  Kerteh  74  Melaka PSR 1  100  Melaka PSR2  170
612
Qatar Petroleum  137  Qatar Petroleum  Laffan  146  Qatar Petroleum, ExxonMobii Qatar Refinery Ltd, Total  SA, Idemitsu Kosan Co., Cosmo Oil Co., Mitsui & Co.,  Marubeni Corp.  283

Umm AI-Narr  90  Abu Dhabi Oil Refining Co.  AI-Ruwais  828  Abu Dhabi Oil Refining Co.  Fujairah  85  Vital Tank Terminals International Co., Fujairah Govt.  Jebel Ali  140  Emirates National Oil Co.  1,143

Sohar  116  Oman Oil Refineries and Petroleum Industries Co.  Mina Ah Fahal  106  Oman Oil Refineries and Petroleum Industries Co.  222

Turkmenbashi  150  Turkmenistan Government  Seidi  150  Turkmenistan Government  300
Petron Malaysia Refining and Marketing Bhd Sarawak Shell Bhd PETRONAS PETRONAS PETRONAS
Dumai Plaju/Musi Cilacap Balikpapan Balongan Sundai Pakning Kasim Cepu Tuban Aromatic 120 117 340 250 125 50 10 4 100 PT Pertamina PT Pertamina PT Pertamina PT Pertamina PT Pertamina PT Pertamina PT Pertamina Pusdiklat Migas Cepu PT Transpacific Petrochemical Indotama 1,116 {Source: Vital Factor analvsisl Serba Dinamik Holdings Berhad Page 33 of71 Industry Assessment 208 8. INDUSTRY OVERVIEW (Cant’d) a VITAL FACTOR CONSULTING ®crealing Winning Business Solutions 6.3 LNG Liquefaction and Regasification Installed Capacity • LNG liquefaction is the process of converting natural gas to its liquid form through a process of super cooling. LNG occupies approximately 600 times smaller volume compared to natural gas at atmospheric pressure. Thus, LNG is more economical for transportation over long distances and storage.
• Regasification is the process of converting LNG back to its original gaseous state at atmospheric pressure. This process is normally required when distributing to end-users where the gas may be used directly.
• Compressors, pumps and turbine mechanical drivers are some of the essential equipment of LNG liquefaction and regasification plants. As such, it is critical for this equipment to undergo regular maintenance to avoid any potential costly breakdowns, loss of output as well as to ensure safe running operations. The level of demand for maintenance services in the downstream gas sector is directly related to the installed capacity of the LNG plants and its locality.

6.3.1 Global LNG Liquefaction and Regasification Global LNG Liquefaction Capacity by Region
(Source: Vital Factor analysis) • Majority of LNG liquefaction plants are located in the Middle East, and Asia and Pacific regions accounting for two thirds of the global LNG liquefaction capacity. Having the third largest natural gas reserve in the world, Qatar has the largest LNG liquefaction capacity in the world of approximately 77 million tonnes per annum (MTPA), produced from 14 LNG trains in 2015. This was followed by Oman, Yemen and the UAE having a total LNG liquefaction capacity of 23.8 MTPA, produced from eight LNG trains. There were no additions of LNG liquefaction capacity between 2011 and 2015 in the Middle East. Serba Dinamik Holdings Berhad Page 34 of71 Industry Assessment 209 800  749  E  00 Africa (CAGR: n.a.)  ~  c  600  ~ … eu  III Middle East (CAGR: 15.4%)  0.  ~ c c  400  mEurope & Eurasia (CAGR: 1.8%) {l.  c  o The Americas  ~  200  (CAGR: 2.0%)  ~  IiilAsia & Pacific  (CAGR: 4.8%)  o
8. INDUSTRY OVERVIEW (Cont’d) O VITAL FACTOR CONSULTING Creating VVinning Business Solutions (~ • Between 2011 and 2015, total LNG liquefaction capacity in Asia and Pacific region grew at a CAGR of 6.5% mainly due to the commencement of three LNG trains in Australia. In the Asia and Pacific region, Australia has the largest LNG liquefaction capacity totalling approximately 33 MTPA in 2015. Indonesia and Malaysia were the next two largest contributors of LNG representing 27.2% and 24.6% of Asia and Pacific region’s LNG liquefaction capacity. In Malaysia, there are three LNG plants owned and operated by PETRONAS with a total of eight LNG trains in PETRONAS Bintulu LNG Complex in Sarawak and a new ninth LNG train (LNG Train 9) coming on-stream. Currently, PETRONAS Bintulu LNG Complex has a combined capacity of 24 MTPA. The new LNG Train 9 will increase the complex’s production capacity by 3.6 MTPA and it is scheduled to commence in January 2017.
• LNG liquefaction capacity in the Africa region grew by an average annual rate of 3.9% between 2011 and 2015 largely due to additions in Algeria and Angola. Meanwhile, there were no additions of LNG liquefaction capacity in The Americas and Europe and Eurasia region over the same period. Both of these regions have the lowest LNG liquefaction capacity totalling approximately 32 MTPA.

Global LNG Regasification Capacity by Region 2011 2012 2013 2014 2015 n.a. = not applicable (Source: Vital Factor analysis) • The LNG regasification capacity grew globally at a CAGR of 4.0% between 2011 and 2015. This was mainly contributed by the growth in Asia and Pacific, and The Americas regions. China had developed more LNG regasification terminals to meet the increase in demand for gas in the country. Over the period of 2011 and 2015, China added on approximately 25 MTPA of LNG regasification capacity in the country. Similarly, the US also developed approximately 27 MTPA of LNG regasification capacities to meet their gas requirements, between 2011 and 2015. Serba Dinamik Holdings Berhad Page 35 of71 Industry Assessment 210 8. INDUSTRY OVERVIEW (Cont’d) VITAL FACTOR CONSULTING O® Creating Winning Business Solutions • In the Asia and Pacific region, Japan has the largest LNG regasification capacity totalling approximately 191 MTPA in 2015. Being a developed country which lacks significant domestic gas reserves, Japan is the largest importer of L1\JG where majority of its LNG imports comes from Qatar, Australia and Malaysia.
• Between 2011 and 2015, LNG regasification capacity grew the fastest in the Middle East with a CAGR of 15.4%, albeit from a low base. The growth was contributed by new LNG regasification terminals in Israel and Jordan in 2013 and 2015 respectively. Meanwhile, new LNG market emerged in the Africa region with LNG regasification capacity in Egypt in 2015 totalling approximately 10 MTPA.

6.3.2 LNG Liquefaction and Regasification in Malaysia, Qatar, UAE, Oman, Turkmenistan and Indonesia LNG Liquefaction Capacity in Countries where Serba Dinamik Holdings Group Derived Revenue in FYE 2015 2011 2012 2013 2014 2015 Malaysia …………….. 23.9 23.9 23.9 23.9 23.9 Qatar…………………. 77.0 77.0 77.0 77.0 77.0 UAE …………………. 5.8 5.8 5.8 5.8 5.8 Oman ………………… 10.8 10.8 10.8 10.8 10.8
Turkmenistan ………
Indonesia …………… 24.5 24.5 24.5 24.5 26.5
Units are in million tonnes per annum; (Source: Vital Factor analysis) • In line with Qatar being the largest exporter of LNG in 2015, Qatar has the largest LNG liquefaction capacity among the six countries under discussion. In 2015, the total LNG liquefaction capacity in the six countries where Serba Dinamik Holdings Group derived revenue represented approximately half of the world’s total LNG liquefaction capacity. The large installed capacity from these countries will auger well for Serba Dinamik Holdings Group to service this sector of the oil and gas industry. LNG Regasification Capacity in Countries where Serba Dinamik Holdings Group Derived Revenue in FYE 2015 2011 2012 2013 2014 2015 Malaysia ……………… 3.8 3.8 3.8
Qatar …………………..
UAE ……………………. 3.0 3.0 3.0 3.0 3.0
Oman ………………….
Turkmenistan ……….
Indonesia…………….. 3.8 3.8 5.6 8.6
Units are in million tonnes per annum; (Source: Vital Factor analysis) Serba Oinamik Holdings Berhad Page 36 of71 Industry Assessment 211 8. INDUSTRY OVERVIEW (Cont’d) C VITAL FACTOR CONSULTING Creating Winning Business Solutions ® •  As regasification is for converting LNG back to its gaseous state at atmospheric  pressure, countries that have large regasification capacity are those that import large  quantity of gas in liquid form.  As such, large gas producing countries like Qatar,  which does not have to import gas, has virtually no regasification capacity.  For such  countries, natural gas can be piped directly or bottled for transportation to end-users.  •  Serba Dinamik Holdings Group provides MRO and IRM services to the downstream  gas processing sector of the oil and gas industry.  As such, the number and size of  such plants would be directly relevant to the business of the Group, especially in the  countries that they provide MRO and IRM services.  •  .  Provided below is  a  list of some  of the LNG liquefaction plants in  some  of the  countries served by Serba Dinamik Holdings Group.

MLNG Satu (T1-3) 8 PETRONAS, Mitsubishi Corp., Sarawak Govt. MLNG Dua (T1-3) 8 PETRONAS, Sarawak Shell Bhd, Mitsubishi Corp., Sarawak Govt. MLNG Tiga (T1-2) 7 PETRONAS, Sarawak Shell Bhd, Mitsubishi Corp., JX Nippon Oil
& Energy Corp., Sarawak Govt. MLNG Dua PETRONAS, Sarawak Shell Bhd, Mitsubishi Corp., Sarawak Govt. Debottleneck 24
Qatargas I (T1) 3.2 Qatar Petroleum, ExxonMobii Corp., TOTAL SA, Marubeni Corp., Mitsui & Co. Ltd Qatargas I (T2) 3.2 Qatar Petroleum, ExxonMobil Corp., TOTAL SA, Marubeni Corp, Mitsui& Co. Ltd Qatargas I (T3) 3.1 Qatar Petroleum, ExxonMobil Corp., TOTAL SA, Mitsui & Co. Ltd, Marubeni Corp. RasGas I (T1) 3.3 Qatar Petroleum, ExxonMobil Corp., Korea Gas Corp., Itochu Corp., LNG Japan RasGas I (T2) 3.3 Qatar Petroleum, ExxonMobil Corp., Korea Gas Corp., Itochu Corp., LNG Japan RasGas II (T1) 4.7 Qatar Petroleum. ExxonMobil Coro. RasGas II (T2) 4.7 Qatar Petroleum, ExxonMobil Corp. RasGas II (T3) 4.7 Qatar Petroleum, ExxonMobii Corp. Qatargas II (T1) 7.8 Qatar Petroleum, ExxonMobii Corp. Qatargas II (T2) 7.8 Qatar Petroleum, ExxonMobil Corp., TOTAL SA RasGas III (T1) 7.8 Qatar Petroleum, ExxonMobil Corp. Qatargas III 7.8 Qatar Petroleum, ConocoPhillips Co., Mitsui & Co. Ltd RasGas III (T2) 7.8 Qatar Petroleum, ExxonMobil Corp. Qatargas IV __7.8—-‘—__ Qatar Petroleum, Shell BV 77 Serba Oinamik Holdings Berhad Page 37 of71 Industry Assessment 212
8. INDUSTRY OVERVIEW (Cont’d) C VITALFACTORCONSULTING Creating Winning Business Solutions ®
ADGAS LNG T1-2 2.6 Abu Dhabi National Oil Company, Mitsui & Co. Ltd, BP Pic, TOTAL SA ADGAS LNG T3 3.2 Abu Dhabi National Oil Company, Mitsui & Co. Ltd, BP Pic, TOTAL _____ SA 5.8
Oman LNG T1 3.55 Omani Govt., Shell BV, TOTAL SA, Korea Gas Corp., Partex (Oman) Corp., Mitsubishi Corp., Mitsui & Co. Ltd, Itochu Corp. Oman LNG T2 3.55 Omani Govt., Shell BV, TOTAL SA, Korea Gas Corp., Partex (Oman) Corp., Mitsubishi Corp., Mitsui & Co. Ltd, Itochu Corp. Qalhat LNG 3.7 Omani Govt., Oman LNG LLC, Union Fenosa Gas SA, Itochu _____ Corp., Mitsubishi Corp., Osaka Gas Co. Ltd 10.8
Bontang LNG T3-4 5.4 PT Pertamina Bontang LNG T5 2.9 PT Pertamina Bontang LNG T6 2.9 PT Pertamina Bontang LNG T7 2.7 PT Pertamina Bontang LNG T8 3.0 PT Pertamina Tangguh LNG T1 3.8 BP Berau Ltd., MI Berau B.V., CNOOC Muturi Ltd., Nippon Oil Exploration (Berau) Ltd., KG Berau Petroleum Ltd., KG Wiriagar Overseas Ltd., Indonesia Natural Gas Resources Muturi Inc., Talisman Wiriagar Overseas Ltd. Tangguh LNG T2 3.8 BP Berau Ltd., MI Berau BY, CNOOC Muturi Ltd., Nippon Oil Exploration (Berau) Ltd., KG Berau Petroleum Ltd., KG Wiriagar Overseas Ltd., Indonesia Natural Gas Resources Muturi Inc., Talisman Wiriagar Overseas Ltd. Donggi-Senoro 2.0 Mitsubishi Corp., Pertamina, Korea Gas Corp., PT Medco E&P LNG 26.5 MTPA = million tonnes per annum; (Source: Vital Factor analysis) 6.4 Electricity Generation • Undertaking maintenance of plant facilities and equipment for the power generation industry, would improve operational efficiencies and reliability, reduce emissions, avoid unplanned downtime while at the same time reduce operational cost of power plants. The growth of electricity generation is a result of the addition of power generation assets. Thus, the increase in electricity generation measures the level of demand for maintenance of power generation assets. Serba Dinamik Holdings Berhad Page 38 of 71 Industry Assessment 213 8. INDUSTRY OVERVIEW (Cont’d) O VITAL FACTOR CONSULTING ®Creating VVinning Business Solutions
• For large power generation plants that use fossil fuels like gas, diesel and coal,
the main equipment installed and thus required to be maintained are as follows: rotating equipment, for example gas fired turbines and diesel engines; and static equipment, for example boilers and heat exchangers for steam turbines.
• Thus, the more power is generated the more rotating and static equipment are required to be installed and maintained.
• Power generation is commonly associated with production of electricity for the national grid for distribution to consumer, commercial and industrial end-users. However, power generation for own use or for a captive user base like operation of offshore platforms, and production, processing and refining of oil and gas is also very extensive.

6.4.1 Global Electricity Generation Electricity Generation by Region
2005 2007 2009 2011 2013 2015 (Source: Vital Factor analysis) • Between 2005 and 2015, global electricity generation increased at a CAGR of 2.8% where most of its growth was from the Asia and Pacific, and Middle East with both regions growing at a CAGR of 5.7% respectively during the same period. Most of the growth was driven by rising demand from developing economies, notably Vietnam, China and other countries in Asia and Pacific, and the Middle East.
• In 2015, the global electricity generation is estimated at 24,098 terawatt-hours (TWh). Asia and Pacific was the region that accounted for the largest installed capacity at approximately 43.2% of global generation of which China represented more than half of the region’s generation, followed by The Americas, and Europe and Eurasia, which accounted for approximately 27.2% and 22.0% of global electricity generation respectively. Meanwhile, both Middle East and Africa accounted for less than 5% of the global electricity generation respectively.

Serba Oinamik Holdings Berhad Page 39 of71 Industry Assessment 214 8. INDUSTRY OVERVIEW (Cont’d) C VITAL FACTOR CONSULTING .®Creating Wnning Business Solutions 6.4.2 Electricity Generation in Malaysia, Qatar, UAE, Oman, Turkmenistan and Indonesia Electricity Generation in Countries where Serba Dinamik Holdings Group Derived Revenue in FYE 2015 lIII Malaysia (CAGR: 4.3%) fiilQatar (CAGR:7.4%) mUAE (CAGR: 5.7%) lIIIOman (CAGR: 10.7%) IEiTurkmenistan (CAGR: 5.7%) Qlndonesia (CAGR: 6.4%) 250 ~ 200 e. Ie 150:::s 0 :::t:::; 100 ell Cl
<3 50 0 2011 2012 2013 2014 2015
(Source: Vital Factor analysis) • Among the six countries that Serba Dinamik Holdings Group derived revenue in FYE 2015, Indonesia generated the most electricity by far. This is mainly because Indonesia has the largest population compared to the other five countries. Indonesia comprises many islands, and providing adequate power to all these islands will help sustain the growth of power generation in Indonesia.
• Continuing growth in power generation for all the six countries will augur well for Serba Dinamik Holdings Group as they represent markets for the provision of MRO and IRM services.

Electricity Generation and Consumption in Malaysia 150 :’2 120 ~ l!! ::::J o 90 ~ (\J ~ & 60 –Electricity Generation (CAGR: 4.3%) •…·Electricity Consumption (CAGR: 4.5%) 140.7137.4 132~.0 –­……._——–_..

_—.—-…··-·-·-·–·124.1 127.1 _.__—-..-_.-.-118.5 .—.—111.6 106.6 30 J——,——,——,—–,—–. 2011 2012 2013 2014 2015p p = preliminary; (Source: Department of Statistics. Malaysia) Serba Dinamik Holdings Berhad Page 40 of71 Industry Assessment 215 8. INDUSTRY OVERVIEW (Cont’d) O
7 7.1 VITAL FACTOR CONSULTING Creating ‘Mnning Business Solutions ® • On the back of growing consumption at a CAGR of 4.5% between 2011 and 2015, total electricity generation in Malaysia also grew at a CAGR of 4.3% during the corresponding period. In 2015, total electricity generated in Malaysia was approximately 140.7 gigawatt-hours (GWh). The growth of Malaysia’s electricity generation was mainly attributed to the growth of electricity generation in Peninsular Malaysia and Sarawak which grew by 13.1 GWh and 7.8 GWh respectively from 2011 to 2015. COM PETITIVE ANALYSIS Nature of Competition in the Industry • In general, service providers undertaking asset maintenance for oil and gas, and power generation industries face normal competitive conditions, which are similar to a free enterprise environment characterised by the following:
The industry is not dominated by a single operator or one or more enterprises that possess such significant power in the market to adjust prices or outputs or trading terms, without effective constrains from competitors or potential competitors. Operators may enter and leave the industry freely.
• While the industry generally operates under normal competitive conditions, service providers would typically need to comply with certain regulations or licensing requirements when providing services to the oil and gas industry. Most commonly, service providers will have to be registered with oil and gas majors, and related authorities in the respective countries. For example in Malaysia, only operators that are licensed or registered by PETRONAS are allowed to bid directly for work provided by PETRONAS, Production Sharing Contract (PSC) and Risk Service Contract operators and contractors in the oil and gas industry in Malaysia.
• In addition, there are some business practices that favour some categories of
service providers are as follows: Some OEM of rotating and static equipment may insist that they or their ASP carry out maintenance at least during the warranty period; Some owners of assets may have a preference for OEM or their ASP to undertake maintenance of their rotating equipment or static equipment.
• Service providers in the industry, including Serba Dinamik Holdings Group, compete on service differentiation, and other factors of competition. Some of these factors of competition or service differentiation include the following:

Quality of products and services offered: The quality of products and services offered are an important consideration for industrial users, particularly those that operate in the oil and gas, and power generation industries. Any breakdown of machineries and equipment in these industries can result in costly plant shutdown and even hazardous Serba Dinamik Holdings Berhad Page 41 of 71 Industry Assessment 216 8. INDUSTRY OVERVIEW (Cont’d) C VITAL FACTOR CONSULTING Creating Winning Business Solutions ® industrial accidents that impact on lives, properties and the environment. The quality of work is assessed based on factors such as timely delivery of maintenance, absence of faults or defects in the work carried out, adherence to safety requirements, and the reliability and competency of the qualified engineers, technician and other personnel. Track record and market reputation: Customers need assurance of service quality, and would normally select operators with an established market reputation and track record. Cost competitiveness: While cost competiveness is always a key consideration in all enterprises, it is even more acute during the current low prices of oil and gas. Service centres: Service providers that have service centres or operational facilities to service their customers’ plants or facilities would have an advantage of being able to be more responsive and prompt in meeting customers’ needs. 7.2 Operators in the Industry • The maintenance industry is highly fragmented ranging from large global and regional organisations to small single location companies. The areas in which each organisation focuses also range from servicing large to small rotating and static equipment. Service providers are also segmented by being OEM, ASP or ISP, and in some situations they merge or form new entities together. OEM of rotating and static equipment are generally larger organisations, and many are also global entities.
• Globally, within the maintenance industry, there have been a series of mergers, acquisitions, joint ventures and strategic alliances. As the maintenance industry is labour and skill intensive and location specific operation, most players in the industry grow their businesses through mergers, acquisitions, joint ventures and strategic alliances to penetrate new locations and industry segments.
• The following are some examples(1 j of operators who undertake asset maintenance for the oil and gas, and power generation industries in Malaysia or Middle East:

Serba Dinamik Holdings Berhad Page 42 0(71 Industry Assessment 217 8. INDUSTRY OVERVIEW (Cant’d) O VITAL FACTOR CONSULTING Creating Vv’inning Business Solutions ®

n.a. 31/12/2015 31/12/2015 30/03/2016 31/12/2015 30/03/2015 30/09/2015 31/12/2015 31/12/2015 31/12/2015 n.a. 31/12/2015 31/12/2015 n.a.
n.a.
n.a.
n.a.

31/12/2015 31/12/2015 31/12/2014 31/12/2015 OEM OEM  –J –J  –J –J  –J –J  –J –J  –J –J  OEM  –J  –J  –J  –J  –J  OEM OEM  –J –J  –J –J  –J –J  –J –J  –J  OEM  –J  –J  –J  –J  –J  OEM OEM OEM  –J –J  –J –J –J  –J –J –J  –J –J –J  –J –J  ISP  –J  –J  –J  ISP ISP ISP ISP  –J –J  –J –J –J  –J –J –J –J  –J –J –J –J  –J  ISP  –J  –J  –J  –J  ISP  –J  –J  –J  –J  ISP  –J  –J  –J  ISP  –J  –J  ISP  –J  –J  –J  –J  ISP  –J  –J  –J  –J  ISP  –J  –J  –J  –J
–JDeleum Berhad 649.4 31/12/2015 ISP Duragate Engineering & 91.9 30/06/2015 ISP –J –J Services Sdn Bhd
Serba Dinamik Holdings Berhad Page 43 of71 Industry Assessment 218 8. INDUSTRY OVERVIEW (Cont’d) O VITAL FACTOR CONSULTING Creating VVinning Business Solutions ®
EPIC Mushtari Engineering  Sdn Bhd (subsidiary of  Eastem Pacific Industrial  27.2  31/12/2015  ISP  Corp. Bhd)  KNM Process Systems Sdn  Bhd (subsidiary of KNM  525.1  31/12/2015  ISP  -V  Grou  Berhad  Makarmas Tenaga Sdn Bhd  5.4  30109/2015  ISP  -V  Mushtari Maintenance Services Sdn Bhd  50.9  31/12/2015  ISP  -V  SapuraKencana Petroleum Berhad  10,184.0  31/01/2015  ISP  -V  -V  Serba Dinamik Holdings Group  1,402.9  31/12/2015  ISP  -V  -V  Tenaga Tiub Sdn Bhd  n.a.  n.a.  ISP  -V  Technofit Sdn Bhd  104.5  31/12/2015  ISP  -V  TNB Repair and Maintenance Sdn Bhd  975.1  31/08/2015  ISP  -V  Turbo-Mech Berhad  36.1  31/12/2015  ISP  -V  Turcomp Engineering Services Sdn Bhd  n.a.  n.a.  ISP  -V
n.a. =Data not available Notes: (1) This is not an exhaustive list. Some ISP may have authorised service agreements for specific OEM equipment, and/or may have collaborations with OEM to provide maintenance services on some of their specific equipment. Some OEM may also provide maintenance services on equipment manufactured by other OEM.
(2) Revenue for companies/group with head office outside Malaysia were translated to RM using the following average annual exchange rates for 2015: USD/MYR: 3.9411; GBP/MYR: 6.0127; EURIMYR: 4.3523; JPY/MYR: 0.0326; SGD/MYR: 2.8575; KRW/MYR: 0.0035; CHF/MYR: 4.0558; OMR/MYR: 10.1017.

Serba Dinamik Holdings Berhad Page 44 of71 Industry Assessment 219 8. INDUSTRY OVERVIEW (Cont’d) C VITAL FACTOR CONSULTING Creating Wnning Business Solutions ® 8 MARKET RANKING 11 th• Serba Dinamik Holdings Group ranked among Oil and Gas Service and Equipment (OGSE) companies in Malaysia providing maintenance services to the oil and gas industry. Ranking was based on the consolidated revenue for FYE 2014 of PETRONAS-licensed companies with Standardised Work and Equipment Categories (SWEC) codes for all types of maintenance services (including, but not limited to, MRO of rotating equipment and IRM of static equipment).
• Serba Dinamik Holdings Group ranked third among OGSE companies in Malaysia providing MRO of rotating equipment services to the oil and gas industry. Ranking was based on the consolidated revenue for FYE 2014 of PETRONAS­licensed companies with SWEC codes for maintenance of rotating equipment. SapuraKencana Petroleum Berhad was ranked first while Dialog Group Berhad was ranked second.
• Serba Dinamik Holdings Group ranked fifth among OGSE companies in Malaysia providing IRM of static equipment services to the oil and gas industry. Ranking was based on consolidated revenue for FYE 2014 of PETRONAS-Iicensed companies with SWEC codes for maintenance of static equipment.

Note: The companies included in the ranking above were based on PETRONAS-licensed companies focusing on those companies whose primary business is related to the OGSE sector. The study was based on a total sample of 2,687 companies for 2014. Companies were assessed based on their consolidated financial results for the financial year ended 2014. The primary source of financial records was from the Companies Commission of Malaysia, Corporate and Business Information Data from which financial records of companies were obtained. Data was collected based on information that was available as of October 2015. The companies included in the ranking for all types of maintenance services, MRO of rotating equipment, and IRM of static equipment were based on the SWEC codes of the PETRONAS-licensed companies as of August 2015. (Source: Malaysian Petroleum Resources Corporation, an agency under the Prime Minister’s Department of Malaysia) 9 GOVERNMENT REGULATIONS AND LICENCES 9.1 Malaysia • In Malaysia, industry specific regulatory requirements binding operators within the asset maintenance industry for the oil and gas, and power generation industries include the following: Serba Dinamik Holdings Berhad Page 45 of71 Industry Assessment 220 8. INDUSTRY OVERVIEW (Cont’d) VITAL FACTOR CONSULTING O.Creating Winning Business Solutions ® 9.1.1 PETRONAS Licensing and Registration • All rights related to the exploration and extraction of petroleum in Malaysia is vested in PETRONAS under the Petroleum Development Act 1974. PETRONAS was also granted control over the carrying on of downstream activities and development relating to petroleum and its products under the Petroleum Development Act 1974.
• All companies wishing to participate in the oil and gas industry in Malaysia are required to obtain either a licence from or registration with PETRONAS before they are allowed to participate in any oil and gas industry activities.

Licence: Company with a valid licence is only allowed to supply goods/services to both the upstream and downstream sector of the oil and gas industry in Malaysia. Registration: Company with a valid registration is only allowed to supply goods/services to the downstream activities of PETRONAS, including maritime activities. • In addition to PETRONAS licensing and registration, product and service providers must also be registered with PETRONAS for the specific categories of work (products and/or services) that they are eligible to provide. These categories of work are known as SWEC where operators must satisfy some minimum technical requirements before they are awarded with one or more SWEC registrations, which are subject to periodic review and renewal. (Source: PETRONAS)
• Serba Dinamik Holdings Group is licensed with PETRONAS and hence the group is able to provide products and services to the upstream and downstream sector of the oil and gas industry in Malaysia.

9.1.2 Registration with the Ministry of Finance • Companies that are supplying or tendering for the supply of products and services to the Malaysian Government must be registered with the Ministry of Finance. (Source: Ministry of Finance Malaysia)
• Serba Dinamik Holdings Group is registered with the Ministry of Finance.

9.1.3 Registration with the Construction Industry Development Board • Under the Construction Industry Development Board of Malaysia Act 1994, it is mandatory for all builders, contractors and sub-contractors, whether local or foreign, to register with the Construction Industry Development Board (CIDB), before undertaking or executing any construction work in Malaysia. Serba Dinamik Holdings Berhad Page 46 of71 Industry Assessment 221 8. INDUSTRY OVERVIEW (Cont’d) A
9.1.4 9.1.5 9.2 9.2.1 VITAL FACTOR CONSULTING ®Creating Vllinning Business Solutions • The Contractor Registration Certificate is a certificate issued by CIDB to recognised contractors that have been registered with CIDB according to the grade and category as specified. The certificate is valid for a minimum period of one year and a maximum term not exceeding three years, unless cancelled, suspended or revoked earlier by the CIDB.
• Serba Dinamik Holdings Group is registered with CIDB.

Registration with Department of Occupational Safety and Health • Any company that is involved in the repair of steam boilers and unfired pressure vessels, manufacturing of unfired pressure vessels, and installation and repair of gas pipelines are required to be registered with the Department of Occupational Safety and Health (DaSH) for the respective services in Malaysia. (Source: Department of Occupational Safety and Health)
• Serba Dinamik Holdings Group is registered with DaSH to act as a repairer of steam boilers and unfired pressure vessel repairers, manufacturer of unfired pressure vessels and gas contractor in Malaysia.

Registration with Tenaga Nasional Berhad • Any company that wishes to supply its products and services including power plant construction and maintenance activities to Tenaga Nasional Berhad will need to be registered as a supplier of products and supplier of services. (Source: Tenaga Nasional Berhad)
• Serba Dinamik Holdings Group is registered with Tenaga Nasional Berhad.

Qatar • According to Law No. 13, 2000 on Organization of Foreign Capital Investment in the Economic Activity, foreign investors are allowed to invest in all sectors of the Qatar economy, provided that Qatari holds not less than 51 % of the share capital.
• Upon approval by the lVIinister of Business and Trade foreign companies or individuals may be exempted from the foreign ownership rules, and may carryon business as a 100% foreign-owned entity in the development and exploitation of natural resources, energy or mining. This is provided that such projects are in line with the development plan of the State of Qatar.

Registration with Qatar Petroleum • Qatar Petroleum (QP) is a state-owned public corporation that manages upstream, midstream and downstream oil and gas operations on behalf of the Government. The activities managed include exploration, production, refining, transport, storage and trading in petroleum products. Serba Dinamik Holdings Berhad Page 47 of71 Industry Assessment 222 8. INDUSTRY OVERVIEW (Cont’d)
• In order to participate in QP Tenders or to be eligible to receive Request for Quotations/Invitations to Tender (ITT), companies, including prospective suppliers and contractors, are required to register as vendors with Qatar Petroleum to obtain a QP SAP Vendor Code.
• Serba Dinamik Holdings Group provides maintenance services to QP and its group of companies through engineering companies and contractors in Qatar.

9.3 UAE • In UAE, industry specific regulatory requirements binding operators within the asset maintenance industry for the oil and gas, and power generation industries include the following: 9.3.1 Registration with Abu Dhabi National Oil Company • Abu Dhabi is the primary producer of oil and gas in UAE. In this respect, the focus on relevant laws and regulations will be for Abu Dhabi. Oil and gas activities in Abu Dhabi pertaining to the upstream, midstream and downstream sectors are regulated by the Abu Dhabi Supreme Petroleum Council as identified in the Federal Law NO.1 of 1988.
• In the UAE, the primary local oil and gas operator is Abu Dhabi National Oil Company (ADNOC), which is governed by the Abu Dhabi Supreme Council. Companies that deal directly with ADNOC and its group of companies to supply products and services are required to register as vendors. This includes contractors and consultants of the relevant oil and gas majors. Contractors and consultants may register under work categories, including the following:

consultancy/engineering; engineering, procurement and construction (EPC), and EPC management and construction works for major projects; minor construction and plant operation/maintenance related works including mechanical plant and equipment works and maintenance(1), maintenance for piping columns and tanks, electrical plant and equipment, instrumentation and telecommunications system, inspection/testing/commissioning services, and other general plant services; information technology related services; personnel and manpower supply/services; finance related services; marketing related services; and domestic/building related and other general services.
Serba Dinamik Holdings Berhad Page 48 of71 Industry Assessment 223 8. INDUSTRY OVERVIEW (Cont’d) O VITAL FACTOR CONSULTING . ® Creating Winning Business Solutions Note: (1) Including maintenance services for turbines, pumps, compressors and other rotating equipment; maintenance services for processing plant and equipment; maintenance services for boilers, furnaces and reactors, heat exchangers; plant maintenance/overhaul/shutdown services; and other mechanical maintenance services. • Serba Dinamik Holdings Group provides maintenance services to ADNOC and its group of companies through engineering companies and contractors in UAE. 9.3.2 Registration with Abu Dhabi Water and Electricity Authority • The power generation industry in the UAE is governed by the individual emirates: In Abu Dhabi, the Regulation and Supervision Bureau enforces the relevant laws by licensing regulated activities. The generation, transmission and distribution of electricity are among the regulated activities that require licences from the Regulation and Supervision Bureau. The Abu Dhabi Water and Electricity Authority (ADWEA) is governed by the Regulation and Supervision Bureau. ADWEA is the single buyer of electricity, and is responsible for the generation, transmission and distribution of electricity in the emirate; The power industry in Dubai, including generation and transmission, are regulated activities that require licences from the relevant authorities. This is governed by Law No (6) of 2011 Regulating the Participation of the Private Sector in Electricity and Water Production in the Emirate of Dubai. Licence applications are processed and approved by the Regulation and Supervision Bureau. Licences are granted by the Dubai Supreme Council of Energy, with the final licence issued by the Regulation and Supervision Bureau. The Dubai Electricity and Water Authority (DEWA) is under the Dubai Supreme Council of Energy, and is responsible for the generation, transportation and distribution of electricity in Dubai; The Federal Electricity and Water Authority (FEWA) is responsible for power generation and distribution in the northern emirates of Ajman, Ras AI Khaimah, Umm AI Quwain and Fujairah. • In general, companies are required to register with authorities such as ADWEA, DEWA and FEWA to directly supply goods, equipment and services, and to participate in the open and selected tenders in the respective emirates. In general, registration is applicable for local companies that are at least 51 % owned by UAE nationals, and companies registered by any Free Zone in the UAE. Foreign companies can work with the local registered vendors for the provision of services, including asset maintenance services in UAE. Serba Dinamik Holdings Berhad Page 49 0(71 Industry Assessment 224 8. INDUSTRY OVERVIEW (Cont’d) O VITAL FACTOR CONSULTING Creating Winning Business Solutions ® • Serba Dinamik Holdings Group provides maintenance services to power generation plant owners through engineering companies and contractors in UAE. 9.4 Oman 9.4.1 Registration with Petroleum Development Oman • In Oman, the Oil and Gas Law Royal Decree 8/2011 is the key legislation for onshore and offshore oil and gas exploration and production. Oil and gas exploration and production activities are governed under the Council for Financial Affairs and Energy Resources in conjunction with Oman’s Ministry of Oil and Gas.
• Petroleum Development Oman (PDO) is the national oil exploration and production company, which is majority owned by the government of Oman. Foreign and local companies are required to register with PDO to participate in public tenders. As part of the national initiatives in Oman, a new vendor registration system, namely Joint Supplier Registration System (JSRS) was introduced in 2014, to encourage foreign and local companies to register with the system. To support the initiative, PDO requested all their vendors including existing registered vendors and new vendors to register through JSRS. PDO maintains a list of approved vendors for the services for its oil and gas operations. Local companies can register for floated tenders and submit their bids prior to registration with PDO.
• Serba Dinamik Holdings Group provides maintenance services to PDO through engineering companies and contractors in Oman.

9.5 Indonesia 9.5.1 Registration with Ministry of Energy and Mineral Resources • The oil and gas industry in Indonesia is regulated by the Ministry of Energy and Mineral Resources (MEMR) and its sub-agencies. Oil and gas industry activities in Indonesia are governed by the Oil and Gas Law No.22 issued in November 2001 (Oil and Gas Law 2001). The Government controls oil and gas activity as the grantor of the relevant concessions and licences.
• Oil and Gas Law 2001 differentiates between upstream activities (exploration, appraisal, development and production) and downstream activities (transportation, storage, refining and commerce). Downstream activities are controlled by business licences issued by the Oil and Gas Downstream Regulatory Agency (BPH Migas).

Serba Oinamik Holdings Berhad Page 50 of71 Industry Assessment 225 8. INDUSTRY OVERVIEW (Cont’d) OVITAL FACTOR CONSULTING Creating Winning Business Solutions ® • When the Oil and Gas Law 2001 was first enacted, upstream activities were controlled through Joint Cooperation Contracts (mainly production sharing contracts (PSC)) between the Oil and Gas Upstream Regulatory and Implementing Agency (BP Migas), and business entities or permanent establishments.
• In November 2012 the Indonesian Constitutional Court decided that BP Migas was unconstitutional. Following this decision, BP Migas was disbanded and all of its duties, functions, responsibilities, assets and staff were transferred to a temporary work unit set up and controlled by MEMR. All contracts previously awarded by BP Migas remained in full force and effect. In January 2013 the temporary work unit was superseded by the Special Taskforce for Upstream Oil and Gas Business Activities (SKK Migas), which is under MEMR control. SKK Migas is currently the upstream oil and gas industry regulator in Indonesia.
• A draft of a new oil and gas law was made public during the first quarter of 2016 for review and discussion before the Indonesian Parliament. The new oil and gas law is expected to be enacted by the end of 2016, following which it will repeal and replace the Oil and Gas Law 2001.
• In general, the procurement of goods and services in the oil and gas industry in Indonesia is conducted either through tender or direct selection or appointment (with certain requirements). Only vendors with Registered Vendor ID are considered qualified contractors and are allowed to bid.
• Presidential Decree NO.39/2014 (Decree No.39/2014) was issued in April 2014. Decree NO.39/2014 restricts Foreign Investment Companies (PMA) from investing in or engaging in specific oil and gas business activities:
PMA may no longer engage in onshore drilling; Maximum foreign shareholding for offshore drilling is 75%; PMA may no longer engage in oil and gas construction services for onshore pipe facilities, production facilities, horizontal/vertical tanks and storage facilities; Maximum foreign shareholding for oil and gas construction services for offshore pipe facilities and spherical tanks is 49%, and 75% for offshore oil and gas platforms; PMA may no longer engage in the operation and maintenance of wells, design and engineering support services, or technical inspections; and Maximum foreign shareholding for oil and gas survey services in 49%.

• According to the RegUlation of the MEMR No. 27 Year 2008, companies that provide supporting business to the oil and gas industry in Indonesia must obtain a certificate of registration, namely SKT MIGAS, from the MEMR. The classification of supporting business under the SKT MIGAS is as follows:

Supporting construction services (Usaha Jasa Konstruksi Migas); Supporting non-construction services (Usaha Jana Non-Konstruksi Migas); Serba Oinamik Holdings Berhad Page 51 of 71 Industry Assessment 226 8. INDUSTRY OVERVIEW (Cont’d) O VITAL FACTOR CONSULTING ® Creating VVinning Business Solutions Supporting industry for materials (Usaha Industri Material); and Supporting industry for equipment (Usaha Industri Peralatan). • Serba Dinamik Holdings Group is registered with the MEMR for supporting non­construction services to the oil and gas industry in Indonesia. 9.5.2 Electricity Supporting Services or Industry Licence • The energy industry in Indonesia is regulated by the MEMR and its sub-agencies. Power generation, transmission and distribution activities in Indonesia are governed by the Electricity Law NO.30/2009 (Electricity Law 2009).
• The Electricity Law 2009 divides the power industry into the following categories: Activities related to supplying electric power, including public supply and captive supply. These include power generation, transmission, distribution and sale; Activities related to supplying supporting goods and services. These include services such as consulting, construction and installation, operations and maintenance, research and development, education, training and certification, and equipment testing and certification; Supply of equipment, inclUding power tools and power equipment.
• Companies involved in supplying supporting goods and services must have either an Electricity Supporting Services Licence or an Electricity Supporting Industry Licence.
• Under the Electricity Law 2009 and the Ministry of Industry Regulation No.48/2010, holders of the Electricity Supporting Services Licence or an Electricity Supporting Industry Licence must prioritise the use of Indonesian goods and services. The minimum percentage requirements are specified under the Ministry of Industry Regulation No.54/2012.
• Serba Dinamik Holdings Group provides maintenance services to the power generation industry in Indonesia through engineering companies and contractors in Indonesia.

THREATS OF SUBSTITUTES • In general, there are no practical substitutes for asset maintenance as it is essential in ensuring that assets continue to operate efficiently, effectively and safely over the assets’ productive lifespan. However, assets may be replaced and replacement may be more practical when assets aged and require higher maintenance. Alternatively, new assets may incorporate new and better technologies that will reduce maintenance costs as well as provide better functionality compared to older assets. Serba Dinamik Holdings Berhad Page 52 of71 Industry Assessment 227 8. INDUSTRY OVERVIEW (Cont’d) VITAL FACTOR CONSULTING . ®Creating Winning Business Solutions O11 RELIANCE ON AND VULNERABILITY TO IMPORTS • In Malaysia and the lVIiddle East region, operators undertaking asset maintenance for the oil and gas, and power generation industries are generally reliant on imports, as many of the equipment parts are manufactured in other countries. For example, these operators typically source equipment parts and systems from principals, manufacturers or regional distributors located overseas such as the US, Japan, Singapore and China. Therefore, these operators could be vulnerable to events and conditions relating to imports.
• In addition, the oil and gas, and power generation industries require professionals with specialised technical expertise, skills and experience. If there is insufficient local expertise, operators could be reliant on specialised skilled foreign workers. Nevertheless, due to the diversity of skills required for the full spectrum of maintenance, operators typically use a combination of local workforce and foreign skilled workers, as well as constantly providing the necessary skills training.

12 INDUSTRY PROSPECTS AND OUTLOOK • The prospects and outlook of the asset maintenance industry for oil and gas, and power generation are closely tied to the overall prospects of the oil and gas, and power generation industries, which are, to a certain extent, dependent on a combination of factors, including: General economic growth; Population growth; Market price of crude oil and natural gas; Growing demand for oil and gas; Investments in oil and gas industry; Forecasted power generating capacity; Ageing oil and gas, and power generation assets.
12.1 General Economic Growth • Positive real GDP growth usually reflects favourable general economic conditions, resulting in an increase in economic activity. This normally results in growth in energy consumption, which would support on-going operations and maintenance of oil and gas, and power generation assets. Continuing growth in energy consumption driven by economic growth would also encourage investments in new oil and gas, and power generation assets. These new assets would require maintenance when they become operational. Serba Dinamik Holdings Berhad Page 53 of71 Industry Assessment 228 8. INDUSTRY OVERVIEW (Cont’d) VITAL FACTOR CONSULTING . Creallng Vvlnning Business Solutions ®OForecast Real GDP Growth Actual Forecast8 /Emerging _. -~MalaYSja …..–Global _.. –­——MENA O+–….–…..—.—I—-,—.—-…—r-……,2011 2012 2013 2014 2016f 2017f 2018f 20191 2020f e == estimates; f == forecast; Advanced == Advanced economies; Emerging == Emerging markets and developing economies; MENA == Middle East and North Africa (Source: Vital Factor analysis) • Following UK’s vote to leave the EU (Brexit) on 23 June 2016, the global economic growth forecast was revised downwards from 3.2% to 3.1 % for 2016. This growth rate is slightly lower than the previous year (2015: 3.2%) which was deemed to be the slowest global economic growth rate since the financial crisis in 2008/2009. The slow forecasted growth was also attributed to an unexpected weak and uneven nature of the economic growth in some of the large emerging and developing economies such as China. Additionally, weaker activities in some major oil exporting countries amidst the sharp decline of oil prices also contributed to the lower growth forecast. From 2017 onwards, the global economy is projected to strengthen as conditions in stressed economies gradually normalise.
• Economic growth in advanced economies particularly advanced European countries are projected to slow down amidst the Brexit vote. Due to the uncertainty of the Brexit vote, UK’s economy is forecasted to slow down even further in 2017. Over the next five years to 2020, economic growth for advanced countries will remain slow amidst low productivity growth and legacies from the global financial crisis.
• On the other hand, emerging markets and developing economies are projected to grow continUingly and will not be severely affected by the Brexit vote. It is expected to be driven by several factors, including:

Gradual normalisation of economic conditions in a number of countries that are currently under stress such as Brazil and Russia; Successful rebalancing of China’s economy; Stronger economic growth in commodity exporting countries; and Improved economic performance in other emerging market and developing economies.
Serba Dinamik Holdings Berhad Page 54 of71 Industry Assessment 229 8. INDUSTRY OVERVIEW (Cont’d) C VITAL FACTOR CONSULTING . ® Creating IMnning Business Solutions • The Malaysian economy has generally been growing at a faster rate compared to the world’s average. It is forecasted to continue to outperform the world’s average economic growth from 2016 to 2020. Economic growth in the MENA region had been growing slower than the world’s average from 2013 to 2015 as the majority of countries relies heavily on oil export revenues. However, the economy of MENA is forecasted to grow gradually at a faster pace from 2016 to 2020 almost reaching the world’s average. This provides an indication of potential drivers for investments and opportunities in these countries, which could be beneficial for operators undertaking maintenance of plant and facilities.
• As it is expected to take an estimated two years for UK to negotiate its exit from the EU, it is difficult to measure the impact of Brexit on the global economy. Additionally, the global growth forecasted by IMF has yet to factor in the results of the US presidential election in November 2016.

12.2 Population Growth • Continuing population growth is important in sustaining and driving energy consumption as the general public is one of the main end users of energy. Growth in energy consumption will support operations to extract oil and gas, and to generate energy. Forecast Population Size and Growth 9,000 1 o Ul ~ 6,000 5 == ~ c otij3,OOO “5 Q. o Q. o Actual Forecas ,( ~ 1( 7,628
1 7,376 7,459 7,543
7,210 17.2927,127 1 1
J I I I I I I I I I
422

475 Wl31
457 466448440431 I ~32 ~32?2iJ31 I ml33 &&133 ~34 I 2014 2015e 2016f 2017f 2018f 2019f 2020f IlIIGlobal (CAGR: 1.1%) I2lMENA (CAGR: 2.0%) mMalaysia (CAGR: 1.7%) e :: estimates; f:: forecast. Note: CAGR is for 2016 to 2020; (Source: Vital Factor analysis) • In general, continuing population growth is expected to result in steadily growing energy consumption, which is likely to result in an expansion of the oil and gas, and power generation asset bases. These assets will require maintenance to ensure their continuing operations. Serba Dinamik Holdings Berhad Page 55 of71 Industry Assessment ,230 8. INDUSTRY OVERVIEW (Cont’d)
12.3 Market Price of Crude Oil and Natural Gas • The market price of crude oil and natural gas is dependent on world supply and demand where a situation of an increase in demand due to disruption in supply will push prices upwards. Similarly, an oversupply situation due to high production coupled with lower economic activities will place downward pressure on prices. Monthly Crude Oil and Natural Gas Price -Monthly Europe Brent Spot Price 150 25·-·-Monthly Indonesian LNG in Japan ……. Monthly Henry Hub Natural Gas Spot Price s-
O+——-,——-r—–“T”””—-+O Oct-DB Oct-10 Oct-12 Oct-14 Oct-16 BTU = British Thermal Unit; (Source: Vital Factor analysis) Note: Monthly average spot prices are calculated from daily closing spot prices.
• Since June 2014, the average monthly price of Brent crude oil, a global price benchmark, had declined by 57.3% from USD112 per barrel in June 2014 to USD48 per barrel in January 2015. The average monthly price of Brent crude oil then rebounded slightly to close at USD64 per barrel in May 2015 before falling further to a 12-year low of USD30 per barrel in January 2016, The average monthly price of Brent crude oil rebounded to USD47 in May 2016 and by early June 2016, the Brent crude oil price reached approximately USD50 per barrel for the first time since July 2015. This however did not hold for long as the result of UK’s vote to leave the EU on the 23 June 2016 coupled with the easing of supply disruptions in Canada contributed to the fall in crude oil prices. In July 2016, the monthly price of Brent crude oil averaged at USD45 per barrel. By October 2016, the monthly price of Brent crude oil had increased to an average of USD50 per barrel.
• Unlike the natural gas market in the US (Henry Hub natural gas spot price), the natural gas prices in the Asian markets typically reflect contracts that are indexed to crude oil or petroleum product prices. In Asia, most natural gas is imported as LNG, and the price is indexed to crude oil on a long-term contractual basis, Therefore, the natural gas price in Asia (Indonesian LNG price in Japan) moves in tandem with the fluctuations of global crude oil prices (Europe Brent spot price).

Serba Oinamik Holdings Berhad Page 56 of 71 Industry Assessment 231 8. INDUSTRY OVERVIEW (Cont’d) O VITAL FACTOR CONSULTING Creating Wnning Business Solutions ® • The decline in crude oil prices beginning in mid-2014 was attributed to a combination of factors including, but not limited to, the increase in the production of shale oil in the US coupled with an increase in crude oil supply from Russia and Iraq, and OPEC’s decision to resist cuts in crude oil production to maintain its market share. All these factors, among others, contributed to a rise in world crude oil supply against a backdrop of declining global growth and slowdown in the economies of Europe and China. The crude oil price in early June 2016 rebounded due to, among others, supply disruptions in Nigeria, reduction in the US crude oil inventories coupled with increase in oil demand from China. Meanwhile, the result of UK’s vote to exit the EU in late June 2016 largely contributed to the fall in crude oil prices in July 2016. 12.4 Growing Demand for Oil and Gas • To keep up with the growing demand for oil and gas, producers would have to continuingly increase production levels. Increase production levels could be met through a combination of greater utilisation of current assets coupled with addition of new production facilities. Global Demand for Oil (2016-2020) Global Demand for Gas (2016-2020) 120 a Africa ~ (CAGR: 2.7%) (CAGR: 3.4%) ~90 ~ 3 <II IlJ Middle East fl] Middle East ~ (CAGR: 1.8%) (CAGR: 2.6%) .b'” ::E'” c'”>. 60 f!I Asia & Pacific.. 1iI Europe & Eurasia 2 ~ (CAGR: 3.2%) Q.'” (CAGR: -0.1%) :::I In 0 ‘i III The Americas ‘E oThe Americas..~ 30 (CAGR: 0.1%) 1 (CAGR: 0.7%) 1XI c ” J! a Asia & Pacific I/) • Europe & Eurasia (CAGR: 2.6%) (CAGR: 0.2%) 0 2016f 2017f 2018f 2019f 2020f 2016f 2017f 2018f 2019f 2020f f = forecast; (Source: Vital Factor analysis) • Between 2016 and 2020, the global demand for oil is projected to grow at a CAGR of 1.3% to reach above 100 million bbl/d by 2020. With global oil production (comprising crude oil, condensates, natural gas liquids, and oil from non-conventional sources) totalling approximately 96.4 million bbl/d in 2015, oil producers would have to ramp up production to meet the increase demand.
• Similarly, between 2016 and 2020, the global demand for gas is projected to grow at a CAGR of 1.3% to reach approximately 3.8 trillion standard cubic metres by 2020. With global natural gas production totalling approximately 3.5 trillion standard cubic metres in 2015, gas producers would need to increase the production of natural gas to meet the increasing demand.

 

Serba Oinamik Holdings Berhad Page 570’71 Industry Assessment 232 8. INDUSTRY OVERVIEW (Cont’d) O VITAL FACTOR CONSULTING Creating \’\!inning Business Solutions ® • In this respect, there will still be continuing opportunities for operators providing maintenance services to the upstream production segment (Le. oil and gas production facilities) as production of crude oil and natural gas would have to continue to meet the increasing demand. 12.5 Investments in the Oil and Gas Industry • The oil and gas industry, particularly the upstream sector, requires a relatively high level of capital investments on various critical facilities and equipment. The capital investments comprise newly built facilities, upgrades, modifications, as well as maintenance and repair of existing facilities. An increase in newly built facilities indicates future demand for maintenance and repair of these facilities. Thus, the level of investment made to the oil and gas industry would have a positive effect on the level of demand for maintenance services required in the industry. 12.5.1 Global Spending in Upstream Oil and Gas Global Upstream Oil and Gas Spending 800 c ~ 600 iii 0 (J) 2­Ul400 C -Gl e ‘Iii 200~ .5 o
2011 2012 2013 2014 2015e 2016f e = estimates; f = forecast; (Source: Vital Factor analysis) • Between 2011 and 2014, global upstream oil and gas spending grew at an average rate of 7.0% per year. However, the spending dropped in 2015. In mid­2014, crude oil prices started to drop from above USD100 per barrel to approximately USD62 per barrel by the end of 2014. The 40% drop in crude oil price forced oil and gas companies to re-evaluate their projects and investment decisions particularly for exploration and development. In 2015, the global upstream oil and gas spending decreased by approximately 20% to an estimated USD521 billion as major global oil and gas companies cut back on capital expenditure. However, the Middle East recorded fewer spending cuts in light of its objective of maintaining market share. Serba Dinamik Holdings Berhad Page 58 of71 Industry Assessment 233 8. INDUSTRY OVERVIEW (Cont’d) O VITAL FACTOR CONSULTING ® Creating VVinning Business Solutions • In the beginning of 2016, with oil price still at its low, major global oil and gas companies announced more cut backs on capital expenditure. In 2016, global spending for the upstream sector of the oil and gas industry is projected to decrease by 15% where the majority of cuts will be in the North American region. Many companies in the US invested heavily when oil prices were around USD100 per barrel resulted in accumulated debts. The low oil price at USD30 per barrel prompted major shale companies to cut back on its 2016 capital expenditure by approximately 40% to 60%. Some oil sand projects in Canada also experienced a decrease in spending in 2016.
• Contrary to other regions, countries in the Middle East are not expected to decrease their capital investments on production for 2016 largely due to OPEC’s commitment to maintain production levels. KSA is reported to be committed to its long term investment plans. Other OPEC country such as Russia is expected to also maintain spending driven largely by the depreciation of the Russian rouble.

12.5.2 Global Spending on Crude Oil Refineries • It is estimated that maintenance and capacity replacement of global crude oil refineries will require investments of more than USD900 billion between 2015 and 2040. This means that on average approximately USD36 billion will be required annually to maintain and replace facilities and equipment of crude oil refineries globally. Maintenance and capacity replacement spending on crude oil refineries are expected to be larger in regions where the installed capacity bases are larger. Forecasted Annual Average Maintenance and Capacity Replacement Spending on Crude Oil Refineries, 2015·2040 15
Asia & The Europe & Middle Africa Pacific Americas Eurasia East Note: Forecasted annual average maintenance and capacity replacement spending on crude oil refineries between 2015 and 2040 was calculated by averaging the total forecasted maintenance and capacity replacement spending on crude oil refineries between 2015 and 2040 of USD903 billion. (Source: Vital Factor analysis) Serba Dinamik Holdings Berhad Page 59 0(71 Industry Assessment 234
8. INDUSTRY OVERVIEW (Cont’d) O VITAL FACTOR CONSULTING ® Creating Wnning Business Solutions • Asia and Pacific region is expected to incur the highest spending to maintain and replace its crude oil refineries due to its larger installed capacity base. In 2015, Asia and Pacific region has total crude oil refinery installed capacity of 32.5 million bbl/d or approximately 34% of global installed capacity. Based on current installed capacity, the majority of spending on maintenance and capacity replacement of crude oil refineries will be in China, followed by India, Japan and South Korea.
• The Americas region is also projected to incur large spending on maintenance and capacity replacement for its crude oil refineries, between 2015 and 2040, where most of the spending will be in the US and Canada. In 2015, the Americas region has total crude oil refinery capacity of 28.1 million bbl/d or approximately 29% of global installed capacity.
• As such, in the medium term, opportunities to provide maintenance services for crude oil refineries are larger in areas where there are larger installed capacity bases. Meanwhile, in the longer term, opportunities to provide maintenance services for crude oil refineries are dependent on new crude oil refinery projects as well as expansions and upgrade that will come on-stream in the next few years. It is estimated that the global crude distillation capacity is expected to increase by

7.7 million bbl/d from 2016 to 2021. Global Crude Distillation Net Capacity Additions, by Region (2016-2021) 4 3.1 o Asia & Middle Africa Europe & Pacific East Eurasia The Americas
Note: Crude distillation net capacity additions include new refinery projects or expansions to existing facilities including condensate splitter additions. (Source: Vital Factor analysis) • The majority of the crude distillation net capacity addition that will be coming on stream in the Asia and Pacific region will mostly be from China. Some of the projects in China include, among others, China National Offshore Oil Corporation’s 200,000 bbl/d Huizhou refinery, PetroChina’s 260,000 bbl/d Anning/Kunming refinery and Sinopec-Kuwait Petroleum Corporation’s 300,000 bbl/d. Meanwhile, refinery projects in other Asia and Pacific region include projects in Japan, South Korea, India, Vietnam, Taiwan and Malaysia. A second refinery in Nghi Son, Vietnam totalling 200,000 bbl/d is expected to come on Serba Oinamik Holdings Berhad Page 600f71 Industry Assessment 235 8. INDUSTRY OVERVIEW (Cont’d) A VITAL FACTOR CONSULTING Creating Wnning Business Solutions ® stream in 2018. Malaysia will see PETRONAS’ 300,000 bbl/d Refinery and Petrochemical Integrated Development (RAPID) project coming on stream in 2019. • Having a low installed capacity base (Le. 9.3 million bbl/d in 2015), Middle East is effectively increasing refinery capacity to meet the global demand growth. With the start-up of three large refineries in KSA and the UAE in the past few years, most of the new additions will come from new projects in Iran. Besides that, there are also new refinery projects and expansions in Qatar, Kuwait, Oman, KSA and the UAE between 2016 and 2021. This will also contribute to the growth in net capacity additions in the Middle East region. 12.5.3 Malaysia Investments in Oil and Gas Industry • The amount of capital investment made in the oil and gas industry will provide an indication of the growth in new assets and facilities. This will increase the size of the installation base of machinery, equipment and structures, which will translate to an increase in maintenance services to keep all these assets and facilities operating efficiently, effectively and safely.
• Capital expenditure by PETRONAS would provide an indication of the capital expenditure for the oil and gas industry in Malaysia. The level of investment made to the oil and gas industry in Malaysia would provide opportunities for operators providing maintenance for such facilities.

PETRONAS’ Capital Expenditure (2011 to 2015) 80
e = estimates; (Source: PETRONAS) Serba Dinamik Holdings Berhad Page 61 of71 Industry Assessment 236 8. INDUSTRY OVERVIEW (Cont’d)
• PETRONAS’ total capital expenditure, including domestic and international operations, between 2011 and 2014 had been on an upward trend until 2015, when it increased marginally. The majority of PETRONAS’ capital expenditure was channelled towards the upstream sector, namely exploration and development activities. For example, in 2014, approximately RM52.4 billion of PETRONAS’ capital expenditure out of total RM64.6 billion, was allocated for the upstream sector of the oil and gas industry. In view of the weak crude oil prices PETRONAS announced in early 2015 to cut approximately 10% of capital expenditure, and 20% to 30% of operational expenditure for the year 2015.
• The marginal increase in capital investments in 2015 was mainly due to higher investments in the downstream sector, but partially offset by lower investments in the upstream segment. Investments in the downstream segment increased by RM2.9 billion whilst upstream segment spending fell by RM3.7 billion in 2015. Higher investments in the downstream segment were mainly attributed to spending on the RAPID project in Pengerang, Johor and Sabah Ammonia Urea (SAMUR) project in Sipitang, Sabah. PETRONAS’ upstream spending in 2015 was mainly channelled to its international operations including Azerbaijan, Canada, Iraq, Turkmenistan and Australia. Meanwhile, local upstream spending includes floating LNG project, LNG Train 9 project in Sarawak and North Malay basin pipeline and facilities in Terengganu.
• In early 2016, PETRONAS announced a decrease in its capital and operational expenditure by RM50 billion over a four-year period (2016 to 2019) starting with cuts of approximately RM 15 billion to RM20 billion in 2016. This cut was from its initial allocation of RM350 billion over a five-year period from 2016 to 2020. Some of the capital expenditure cuts would include, among others, revision of contracts such as Risk Service Contracts and enhanced oil recovery contracts. PETRONAS also announced a delay of the commissioning of its second floating LNG.
• Despite the spending cuts, PETRONAS is reported to remain committed to its downstream projects including, RAPID, SAMUR and specialty chemical projects in Kuantan, Pahang. PETRONAS is reported to have invested approximately RM3 billion in 2015 of which the capital expenditure was primarily on SAMUR in Sipitang, Sabah, and integrated aroma ingredients complex in Gebeng, Pahang, as well as commencement of RAPID petrochemicals project. Over the next four years between 2016 and 2020, PETRONAS is committed to spend a total of USD4 billion. For 2016, capital expenditure of USD1 billion was committed where the bulk will be channelled into the RAPID and SAMUR project.
• The RAPID project will consist of a refinery with 300,000 bbl/d capacity, and petrochemical complex with a combined chemical output capacity of 7.7 MTPA of various petrochemical products. The refinery will produce naphtha and liquid petroleum gas as feedstock for the petrochemical complex, as well as gasoline and diesel that will meet European specifications. Five EPCC contracts were awarded for the refinery component in 2014 while three EPCC projects

Serba Oinamik Holdings Berhad Page 62 of71 Industry Assessment 237 8. INDUSTRY OVERVIEW (Cont’d) O VITAL FACTOR CONSULTING Creating VVinning Business Solutions ® (polyethylene, glycol and polypropylene plant) were awarded for the petrochemical complex in late 2015. The RAPID project is expected to commence operation by end 2019.  •  The SAMUR project consists of an ammonia plant, urea plant and a granulation plant. The plant is expected to have a production capacity of 1.2 MTPA of granulated urea and 0.74 MTPA of liquid ammonia. The SAMUR project is expected to be operational by 2017.  •  The integrated aroma ingredients complex is undertaken by BASF-PETRONAS Sdn Bhd (BASF-PETRONAS). The complex is located in Gebeng, Pahang. The RM1.5 billion complex consists of facilities to produce Citral, Citronellol and L-menthol which are aroma ingredients used as flavours and fragrances. It is expected to come on­stream in 2016. Besides the aroma complex, BASF-PETRONAS is also undertaking two other specialty chemical projects in the same location namely a 2-ethylhexanoic acid (2-EHA) production plant and a highly reactive polyisobutene (HR-PIB) production plant. The 2-EHA plant is expected to come on stream by end of 2016, while the HR-PIB plant is expected to start production late 2017.  •  Additionally, in April 2016, PETRONAS and the Government of Sarawak entered into a Memorandum of Understanding (MOU) to conduct a joint feasibility study for the Sarawak Petrochemical Master Plan to boost the petrochemical industry in Sarawak.  •  All these newly built and upcoming facilities would create new opportunities for operators providing maintenance services for such facilities when they become operational. PETRONAS’ Cost of Operation
240 180 ‘2 o ~ 120 :E 0:: 60 o
2011 2012 2013 2014 2015 Note: Cost of operation is calculated by subtracting earnings before interest, tax, depreciation and amortisation (EBITDA) from revenue. Serba Dinamik Holdings Berhad Page 63 of71 Industry Assessment 238 8. INDUSTRY OVERVIEW (Cont’d) O VITAL FACTOR CONSULTING Creating Winning Business Solutions ® • Maintenance services are part of the cost of operations. Between 2011 and 2014, PETRONAS’ costs of operations were growing at a CAGR of 15.2%. However, in 2015, PETRONAS’ costs of operations fell by 15.1 %. Subsequently in early 2016, PETRONAS also announced cuts of approximately RI\t115 billion to RM20 billion for both capital and operational expenses. 12.5.4 Malaysia Investment in the Downstream Oil and Gas Industry • The future of Malaysia’s downstream oil and gas industry is set to be transformed with the development of Pengerang Integrated Petroleum Complex (PIPC) in Pengerang, Johor. Totalling approximately 20,000 acres of land area, PIPC comprises two confirmed projects, namely the Pengerang Deepwater Terminal (PDT) and PETRONAS’ Pengerang Integrated Complex (PIC).
• The PDT project comprises storage capacity of 5 million cubic meters for crude oil, gas and petroleum products. The first phase of the project, namely Pengerang Deepwater Terminal 1 (PDT1), comprises 1.3 million cubic metres of independent storage facility and six deepwater berths with an investment of approximately RM2 billion. It has the capability to handle the storage, blending and distribution of crude oil, petroleum, chemical and petrochemical feedstock products, and by­products. PDT1 is jointly owned by Dialog Group Berhad, Royal Vopak of the Netherlands and the State Government of Johor. PDT1 commenced operations in 2014. The second phase of the project, namely Pengerang Deepwater Terminal 2 (PDT2) will be dedicated to PETRONAS’ RAPID project.
• With an estimated investment of USD 27 billion, PETRONAS’ PIC covers an area of 6,242 acres within the PIPC. The PIC consists of the RAPID project as well as six associated facilities namely the Pengerang Deepwater Terminal 2 (PDT2), Pengerang Co-generation Plant (PCP), Air Separation Unit (ASU), Projek Air Mentah RAPID (PAMER), Re-gasification Terminal 2 (RGT2) and Centralised Utilities & Facilities (CUF). The PIC project is designed to produce premium differentiated petrochemicals to meet the domestic demand for petroleum products. It also serves to fulfil the Malaysian Government’s requirement on the implementation of Euro 5.
• In addition, other future developments within the PIPC master plan includes, among others, plastic and fine chemicals industrial park, commercial services hub, solids logistics hub, as well as medium and light industries hub.
• Increased activities in the downstream oil and gas sector in Malaysia will benefit service providers like Serba Dinamik Holdings Group in the provision of N1RO and IRI\t1 services when facilities are completed and operating.

Serba Dinamik Holdings Berhad Page 64 of71 Industry Assessment 239 6,393  6,468  6,577  13 Oil  6.000  (CAGR: -1.1%)  I!!INuclear  ~ 4,500 :=  (CAGR: 2.7%) IilI Renewables # (CAGR: 6.7%)  ~  ~3,OOO  CllHydro  t5  (CAGR: 1.8%)  aGas  1,500  (CAGR: 0.4%)  IICoal  o  (CAGR: 0.4%)
8. INDUSTRY OVERVIEW (Cont’d) C VITAL FACTOR CONSULTING .Creating Winning Business Solutions ® 12.6 Forecasted Power Generating Capacity Global • The demand for maintenance services of power generation plants is directly related to installed power generating capacity. Hence, the immediate demand for maintenance services of power generation plants are larger in regions with larger # Include wind power, solar electricity, geothermal and other renewables; f =forecast; (Source: Vital Factor analysis) • The total installed power generating capacity is forecasted to grow at a CAGR of 1.6% between 2016 and 2020 driven mainly by growth in the Asia and Pacific region. Growth in installed power generating capacity in Asia and Pacific region is largely attributed to China and India, two of the largest consumers of energy. Growth of installed power generating capacity in Africa and Middle East region during the same period, are forecasted to grow at a faster rate than global growth, albeit at a lower base.
• Between 2016 and 2020, fossil fuelled power generation plants (Le. those that use coal, gas or oil as their primary fuel) account for more than half of the total installed power generating capacity during the period. This indicates that there are still continuing opportunities for operators providing maintenance services for fossil fuelled power generation plants which are typically equipped with large industrial turbines and steam boilers.

installed power generating capacity. Global Forecasted Total Installed Power Generating Capacity by Region (2016 -2020)
7,500  6,393  6,468  6,577 III Afric3  6,000  (CAGR: 2.2%)  III Middle East  ~4,500  (CAGR: 2.0%)  :=; ~3,000  Iill Europe &Eurasia (CAGR: 1.0%)  t5  a The Americas  1,500  (CAGR: 0.5%)  IIIAsia & Pacific  (CAGR: 2.5%)  o  2016f  2017f  2018f  2019f  2020f
Global Forecasted Total Installed Power Generating Capacity by Fuel Type (2016 -2020)
7,500 2016f 2017f 2018f 2019f 2020f Serba Dinamik Holdings Berhad Page 65 of71 Industry Assessment 240 8. INDUSTRY OVERVIEW (Cont’d) C VITAL FACTOR CONSULTING Creating WInning Business Solutions ® • However, between 2016 and 2020, the installed capacity of power generation plant using renewable resources is forecasted to increase at a faster rate than fossil fuelled power generation plants, indicating a gradual trend towards renewable resources for power generation. This indicates that operators that are currently providing maintenance services for fossil fuelled power generation plants should gradually widen their expertise in providing maintenance to facilities and equipment of power generation plants using renewable resources such as hydropower and wind power plants, both of which uses rotating equipment to generate electricity. Global Forecasted Average Annual Investment in Power Generating Capacity (2016 • 2020) by Fuel Type and Region 250  E!lNuclear  206  III Renewables #  200  o Hydro  mFossil Fuel II  Asia &  Europe &  The  Africa  Middle  Pacific  Eurasia  Americas  East

# Include wind power, solar electricity, bioenergy and other renewables; II Include oil, gas and coal. (Source: Vital Factor analysis) • Between 2016 and 2020, the forecasted average annual investment in power generating capacity is estimated to be at least USD400 billion, where a vast majority of the investment will be in the Asia and Pacific region. Fossil fuel power generating plants account for approximate 30% of the total average annual investment in the Asia and Pacific region. Majority of these investments are forecasted to be in China and India, and are mainly in coal-fired power generation plants. Meanwhile, hydroelectric and other renewables (i.e. wind power, solar electricity, bioenergy and others) account for approximately 20% and 38% respectively of the total average annual investment in the Asia and Pacific region. In the Middle East, the forecasted average annual investment in power generation plant is estimated at USD12 billion, of which the investments are mainly for gas­fired power generation plants. Serba Dinamik Holdings Berhad Page 66 of71 Industry Assessment 241 8. INDUSTRY OVERVIEW (Cont’d) A VITAL FACTOR CONSULTING Creating Winning Business Solutions lID Malaysia • In Malaysia, the Generation Development Plan for 2015 to 2025 included development of a total of 19 power projects with a combined installed capacity of 9,912 MW in Peninsular Malaysia and Sabah. Some of these projects include, among others, 400 MW Pengerang Co-generation power plant in Johor, 1,000 MW Manjung Unit 5 power plant in Perak, and new power plants in Lahad Datu and Sandakan totalling 90 MW. (Source: Energy Commission Malaysia)
• In Sarawak, some of the major power generation facilities are Bakun hydropower plant, Murum hydropower plant, Mukah coal-fired power plant, Tanjung Kidurong combined cycle power plant, and Sejingkat coal-fired power plant. Sarawak plans to develop an additional 400 MW combined cycle power generation plant at Tanjung Kidurong, Bintulu, a new 1,200 MW combined cycle power generation plant in Samalaju, Bintulu, and a new 600 MW coal-fired power plant in Balingian, Mukah. Sarawak also plans to spend between RM8 billion and RM10 billion to improve its power transmission and distribution systems over the next 10 years until

2025. (Sources: Sarawak Energy Berhad; Vital Factor analysis) 12.7 Ageing Oil and Gas, and Power Generation Assets • In general, the age of oil and gas, and power generation assets influences demand for maintenance services. Aging assets generally require more maintenance. Maintenance is required to sustain safety, efficiency, and to satisfy regulatory requirements. In some cases, older assets may be upgraded or retrofitted with the intention of increasing capacity, improving efficiency, extending their productive lives, and/or complying with regulations.
• As an example, the average age of LNG liquefaction plants globally are approximately 15 years old which indicates the need for upkeep, maintenance or replacement of equipment and machineries. (Source: Vital Factor analysis)

13 DEVELOPMENTS IN THE POWER GENERATION INDUSTRY IN INDONESIA • Developments in the power generation industry in Indonesia will continue to provide opportunities for power producers. Under Indonesia’s Power Supply Business Plan (RUPTL) 2015-2024, the Government of Indonesia has outlined a goal for the development of the country’s power infrastructure to meet the increasing demands for electricity consumption, which is expected to increase at a CAGR of 8.7% per year between 2015 and 2024. The demands for electricity and electricity consumption will be in tandem with the increase in population. In 2015, Indonesia had a total population of 255.5 million. In addition, in 2015, the Government of Indonesia launched a programme to accelerate the increase in power generation capacity by an additional 35 GW together with the expansion of other infrastructure including an additional 45,000 kilometres of transmission networks and 109,000 Serba Dinamik Holdings Berhad Page 67 of71 Industry Assessment 242 8. INDUSTRY OVERVIEW (Cont’d) O VITAL FACTOR CONSULTING Creating INInning Business Solutions ® megavolt amperes (MVA) of substations. The programme for expansion is expected to be contributed by PT PLN and independent power producers. • The electricity demand forecasts are prepared based on the amount of electricity needed to support the economic growth targeted by the government as well as population growth. During the period between 2015 and 2024, the forecasted demand for electricity consumption in selected regions is as follows: Forecasted demand for electricity consumption (CAGR 2015-2024)  Population (CAGR 2010-2015)  Population in 2015 (million)  Sumatra (1)  11.6%  1.7%  55.3  Java-Bali  7.8%  1.2%  159.3  East Indonesia  11.1%  1.8%  40.9  -Kalimantan (2)  10.4%  2.1%  15.3  -Sulawesi  12.4%  1.4%  18.7  -Maluku (3)  10.3%  2.0%  2.8  -Papua  9.4%  2.1%  4.0  Indonesia  8.7%  1.4%  255.5
Notes: (1) Muaro Jambi is a regency ofJambi province in Sumatra.
(2) East Kutai is a regency of East Kalimantan province in Kalimantan.
(3) Ambon Island is part of Maluku province in Indonesia. (Sources: PT PLN (Persero); BPS -Statistics Indonesia)

 

• The forecasted demand for electricity consumption between 2015 and 2024 in Sumatra and East Indonesia are expected to increase at a higher CAGR compared to overall Indonesia.
• According to RUPTL, the power generation capacities in Sumatra and East Indonesia are barely sufficient to meet the power needs of the communities. Thus, there can be shortfalls when there are disruptions to the power supply or plants needed to undergo routine maintenance. For example, the power generation system in northern Sumatra operates almost throughout the year without backup operation, and often experience shortfalls in power supply. The south Sumatra system also experience similar issues, suffering from shortage of power for most of the year. This same situation also occurs in several other areas such as West Kalimantan, East Kalimantan, South Kalimantan, Southeast Sulawesi, Minahasa­Gorontalo, Palu, Lombok, Ambon, Ternate and Jayapura. Some of the actions taken in Sumatra and East Indonesia to overcome the problems of power shortage include rental of power generation capacity and purchasing of power from small-scale independent power producers. In addition, the RUPTL plans a small number of power plants that use LNG or CNG in East Indonesia.

Serba Dinamik Holdings Berhad Page 68 of71 Industry Assessment 243 8. INDUSTRY OVERVIEW (Cont’d) O
14 14.1 14.2 VITAL FACTOR CONSULTING Creating WInning Business Solutions (J11 • There are six interconnected power systems and more than 100 isolated systems spread throughout the eastern region of Indonesia. The systems are spread over the provinces of Maluku, North Maluku, Papua, West Papua, West Nusa Tenggara, East Nusa Tenggara and Riau, Belitung, Buton, Selayar, Karimun Java, Bawean and many other islands. THREATS AND RISKS ANALYSIS Global Economic Slowdown • Any widespread and/or prolonged economic slowdown would affect consumer and business confidence, and subsequently their propensity to spend and invest. This slowdown would ultimately affect most industry sectors and in turn impact the operators undertaking asset maintenance for the oil and gas, and power generation industries.
• In addition, a widespread and/or prolonged slowdown in the global economy may reduce global demand for oil and gas, which may have a negative impact on their market prices, thus affecting the oil and gas industry. In light of the depressed crude oil prices experienced in the second half of 2014 and continuing onto the first quarter of 2016, the Government of Malaysia as well as other oil producing countries may implement budgetary cuts. A cut in bUdgetary spending may depress economic growth in Malaysia as well as other oil producing countries, thus affecting businesses across a wide cross section of the economies.
• Operators who have contracts in hand, are to a certain extent, insulated from the effects of a global economic slowdown for the duration of their contracts. Service providers who do not possess contracts are more likely to be exposed to the impact of a global economic slowdown.
• In addition, each country benefits from various government initiatives targeted to support and develop the energy industry, including oil and gas, and power generation activities. This would continue to drive local and foreign investments as well as spur activities within the targeted industries, thus providing growth opportunities for operators undertaking maintenance of plant facilities and equipment.

Sustained Fall in the Market Price of Hydrocarbons • Hydrocarbons, including crude petroleum and natural gas, are internationally traded commodities that are subject to price fluctuations. Geopolitical factors, economic conditions, supply and demand conditions, and unforeseen supply disruptions may influence the market price of hydrocarbons.
• Activities in the oil, gas and petrochemical industries are, to some degree, affected by fluctuations in the market price of hydrocarbons, for instance:

Serba Oinamik Holdings Berhad Page 69 of71 Industry Assessment 244 8. INDUSTRY OVERVIEW (Cant’d) .O
VITAL FACTOR CONSULTING Creating VVlnning Business Solutions ® Activities tend to increase during periods of sustained high hydrocarbon prices. This is due to elevated production activities, as well as increased activities in exploration and development to take advantage of high hydrocarbon prices; Activities tend to decline during periods of sustained low hydrocarbon prices. This is due to lower exploration, development and production activities, as well as temporarily reducing or shutting down production from fields that are no longer commercially viable. • Since June 2014, the average monthly price of Brent crude oil had declined from USD112 per barrel in June 2014 to USD48 per barrel in January 2015. It rebounded slightly to close at USD64 per barrel in May 2015 before falling further to USD30 per barrel in January 2016. By the early June 2016, the average daily price of Brent crude oil rebounded to approximately USD50 per barrel for the first time since July 2015. However, in JUly 2016, the monthly price of Brent crude oil declined and averaged at USD45 per barrel. By October 2016, the monthly price of Brent crude oil had increased to an average of USD50 per barrel. Similarly, the trend in natural gas price, particularly in Asia, moves in tandem with the fluctuations in Brent crude oil prices.
• There is a risk that the demand for asset maintenance services may be affected by the depressed oil and gas prices which may continue to dampen the level of activities in the oil and gas industry. Oil and gas companies generally react to declining oil and gas prices by reducing both capital and operational expenditures.
• While the low crude oil prices will depress activities in the oil and gas industry in the immediate term, it is expected that the oil and gas industry is likely to improve once crude oil prices stabilises. Nevertheless, there can be no assurance that crude oil prices will stabilise or that the timing of such improvement is imminent if it eventuates.
• While all sectors of the oil and gas industry are affected by a sustained fall in the market price of hydrocarbons, maintenance of assets particularly in the production of crude oil and natural gas and downstream refineries, processing and petrochemical plants, are, to a certain extent, less affected as operations would still have to continue. As for the downstream sector of the oil and gas industry, operators would benefit from the lower crude oil and natural gas prices as the feedstock for their operations.
Changes in Government Policies
• Any changes in government policies with regards to the regulation in the oil and gas, and power generation industries may impact on operators undertaking maintenance of plant facilities and equipment in the respective countries in which they operate.

Serba Dinamik Holdings Berhad Page 70of71 Industry Assessment 245 8. INDUSTRY OVERVIEW (Cont’d) O VITAL FACTOR CONSULTING .® Creating INinning Business Solutions • As an example, PETRONAS may liberalise the oil and gas industry in Malaysia by: removing licensing and registration requirements for the provision of supporting products and services; loosening licensing and registration requirements such that it becomes easier to obtain a licence or registration; and allowing foreign suppliers to operate in Malaysia without the need to operate with a local partner and other restrictions.
• Liberalising the oil and gas industry in this manner may negatively impact or incumbent service providers by increasing competition in the industry.
• Operators that meet the licensing and registration requirements are currently competing with other operators based on commercial, technical and other factors such as track record and market reputation. In the event of any changes in government policies, existing service providers would not be significantly worse off as they are already operating in a competitive environment.

Serba Dinamik Holdings Berhad Page 71 of 71 Industry Assessment 246

 

 

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