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Kota Kinabalu: Sabah has long been a crucial contributor to Malaysia’s oil and gas production, both in upstream and downstream activities.

Amidst evolving and complex challenges, the local oil and gas services and equipment (OGSE) sector remains resilient in driving Sabah’s economic growth.

Displaying unwavering commitment and adaptability, Sabah’s OGSE players have demonstrated impeccable strengths in embracing change, driving innovation and maintaining strong work ethics, all while navigating market uncertainties and industry volatilities.

Navigating a Challenging Industry Landscape

As the oil and gas industry progresses, local OGSE vendors face unique challenges that impact their competitiveness and growth.

One of the voices representing this dynamic sector is the Sabah Oil and Gas Services Council (SOGSC), which serves as a business platform for local OGSE players.

Since its establishment in 2014, the association has played a pivotal role in advocating for the industry, developing skills, fostering collaboration, promoting market access and engaging in strategic discussions.

The President of SOGSC, Datuk Hj Harris Hj Annuar Tan, reflects on his early days in the industry, noting that uncertainties extended beyond fluctuating oil prices.

“Back in the early 90s, when I first joined the industry, attracting oil companies to Sabah’s blocks was fraught with uncertainty.

“To enhance our appeal, we had to diversify our business and collaborate with stakeholders to ensure we provided the best services,” he said.

In 2020, during the COVID-19 pandemic, while industry players faced turbulent conditions affecting sustainable operations, Persatuan Kontraktor Petroleum Bumiputera Sabah (PKPBS) was also established for Sabah vendors.

The association aims to unite vendors with existing contracts with major oil players, serving as a platform for the group to address unanticipated challenges that impacted all players in the oil and gas industry.

The President of PKPBS, Mohd Safian Saludin, emphasised that the association stands ready to support initiatives aligned with their slogan, “Driving the Country’s Development Together,” reaffirming their commitment to expanding local vendors’ participation in the sector.

Mohd Safian urged Sabahan vendors to be prepared for challenges, market changes and economic fluctuations.

“Sabahan vendors must seize opportunities to venture into new areas, diversify their offerings and remain competitive while strengthening their core expertise,” he said, while adding that with collective commitment, the growth agenda for local vendors can be achieved.

“This inclusive collaboration between industry associations like PKPBS, SOGSC, PETRONAS and the Sabah State Government has shown notable progress in increasing Sabah vendor participation,” he said.

Having served for 30 years in the oil and gas industry, Datuk Hj Harris has experienced numerous setbacks, using his extensive expertise to provide solutions and guide companies through the complexities of managing oil and gas activities.

“I remember during one of my earlier roles, we had to prepare logistics to transition from a shallow water supply base to a deepwater base – a challenge we were unprepared for.

“However, despite not having the foundational background and the complexities of the operations, we worked closely with our clients to deliver the best services,” said Datuk Hj Harris.

The local oil and gas industry has come a long way since then. In 2021, the Sabah Government and PETRONAS signed a Commercial Collaboration Agreement (CCA) to further develop Sabah’s oil and gas industry.

This agreement aimed to increase the state’s revenue by increasing participation in the energy value chain and fostering industry development alongside PETRONAS.

Since then, the state has seen substantial benefits, including an increase in local vendors and expanded capacity development opportunities.

This collaboration has opened up new opportunities for Sabah vendors, enabling them to diversify into high-technology areas such as large-scale offshore support vessels, integrated maintenance and turnaround services, statewide integrated oil and gas logistics and comprehensive well services, to name a few.

Datuk Hj Harris highlighted how this partnership, along with the establishment of industry associations like SOGSC and the ongoing support from PETRONAS and SMJ Energy Sdn Bhd, has attracted more locals to the industry, provided them a platform and helped establish frameworks and guidelines to streamline operations.

It has also bridged the gap between established OGSE players and Sabah-based vendors through programmes focused on skills development, technology adoption and compliance training, all of which have enhanced local vendors’ competitiveness.

Yet despite these advancements, Sabah’s oil and gas industry still faces challenges in building technical and financial capabilities.

“Vendors need to develop strong technical expertise, ensure financial stability and establish robust commercial models to identify and excel in key areas of the industry,” Datuk Hj Harris emphasised.

“Without a solid foundation in these areas, local vendors will struggle to compete with more established players who possess superior resources, advanced technology and broader market access,” he added.

As the current President of SOGSC, Datuk Hj Harris is driven by a strong desire to help nurture a thriving oil and gas industry in Sabah.

Building Capabilities for a Competitive Future

To overcome the challenges ahead, investing in human capital is key to ensuring the long-term success and sustainability of the oil and gas industry.

PETRONAS Senior Vice President Datuk Ir. Bacho Pilong echoed this sentiment, emphasising the need to invest in nurturing local talent to ensure the sector’s competitiveness and growth.

“Recognising the significance of a skilled workforce, PETRONAS remains committed to talent development to build a strong OGSE industry.

“The sector must adapt to industry demands, foster innovation and navigate the transition toward cleaner and more sustainable energy solutions,” Datuk Ir. Bacho said during his keynote speech at the recent OGSE Partners Day held in Kuala Lumpur on 4 September 2024.

On behalf of PKPBS, Mohd Safian expressed concern regarding these sentiments, emphasising that growing the capabilities of Sabah vendors should be a collective effort.

He acknowledged that, while the agenda is noble, it requires focused and coordinated efforts to bridge existing gaps.

SOGSC also recognises the importance of operational readiness and believes that combining local expertise with the experience of larger players presents opportunities for growth and knowledge sharing.

“At SOGSC, our goal is to build strong partnerships and mentorship programmes that bridge the gap between local OGSE vendors and major industry players,” said Datuk Hj Harris.

One key initiative in this effort is the Sabah Mentorship Programme, a collaboration between SOGSC, PKPBS and the Malaysian Oil, Gas and Energy Services Council (MOGSC), with support from PETRONAS and the Sabah State Government.

The programme fosters alliances between local Sabahan companies and larger corporations, with participation from 43 SOGSC companies, 11 from PKPBS and 35 from MOGSC.

“The programme has facilitated collaboration and innovation, allowing companies to network and grow.

“For instance, we helped a local engineering firm partner with a technology solutions provider, which led to the company securing a significant contract,” added Datuk Hj Harris.

He further emphasised that the true measure of success goes beyond mentorship, stressing the importance of project performance and contract execution and calling for more targeted coaching and strategic development initiatives.

PETRONAS also shares this collaborative focus, highlighting the critical role of partnerships between industry players, stakeholders and the government in building a resilient energy ecosystem.

Datuk Ir. Bacho Pilong noted that joint ventures and alliances will help to pool resources and expertise, creating innovative solutions to the industry’s challenges.

This is aligned with the Sabah State Government agenda to benefit both Sabahan companies and employees, fostering a more robust and sustainable OGSE sector in the years to come.

Together, Stronger

As the current President of SOGSC, Datuk Hj Harris is driven by a strong desire to help nurture a thriving oil and gas industry in Sabah.

“Seeing the transformation of Sabah’s OGSE sector, watching local companies grow, create jobs and contribute to the state’s economic development is incredibly fulfilling,” he reflected.

He recalls the early challenges he observed in the industry when a local company faced a complex, technical challenge on a project but the lack of collaboration left them with limited options.

“Today, things have changed and I’m confident that in the next five to ten years, with strong associations like SOGSC and the continued support of PETRONAS, we can overcome such hurdles together and unlock the immense potential of Sabah's OGSE players,” he added.

“With oil and gas resources in our own backyard, it’s vital that we push forward and establish ourselves as a major industry player. This means consolidating resources, empowering local companies, and securing larger contracts,” he explained.

He envisions a collaborative effort involving PETRONAS, the government, industry players, and local stakeholders to strategically position Sabah in the oil and gas industry.

“By working together, we can ensure that the wealth generated from our natural resources benefits our people directly and supports sustainable growth,” Datuk Hj Harris concluded.