Malaysia’s national oil company Petronas is not going to be acquiring cash-strapped compatriot contractor Sapura Energy, which would have brought it under the same group as rival contractor Malaysia Marine & Heavy Engineering (MMHE) and shipping giant MISC.
Referencing news reports, comments in the media and recent speculation on its purported “talks with the government on a proposal to take a significant stake” in Sapura Energy, Petronas told Upstream that it “wishes to categorically deny these reports and speculation”.
“We have always been and will continue to be strictly guided by an established framework for any investment or divestment consideration,” said Petronas.
The Malaysian energy company added it “wishes to emphasise it remains committed to working closely together with the OGSE (oil and gas services and equipment) players, leveraging on their expertise and capability as activities increase with the industry recovering from the impact of Covid-19”.
Sapura’s financial woes have been widely reported. The contractor has been hit worse than many of its competitors by the fallout from the coronavirus pandemic, not least because of its order book’s exposure to the transportation and installation (T&I) sector.
Offshore T&I workscopes can require hundreds of workers on location. At the height of the pandemic, these workers each required numerous very costly PCR tests on top of long quarantine periods in hotels before and after jobs.
Just one such crew mobilisation can cost hundreds of thousands of dollars, if not more, amounts that were never envisaged pre-Covid, and the logistical challenges and costs quickly escalated if just one worker tested positive for the coronavirus.
Against this backdrop, Sapura did not secure work it had hoped as operators deferred taking the final investment decision on projects, itself another knock-on from the pandemic.
Former Malaysian prime minister Najib Razak last week called on the current government to protect Sapura from bankruptcy — and one suggestion he mooted was for the administration to instruct national oil company Petronas to acquire the contractor.
“This was how Petronas saved MISC (now an indirect subsidiary of the energy giant) in 1998. Upon recovery, Petronas… can resell part of Sapura’s shares to the local market just as Petronas resold MISC’s shares to make a profit,” said Najib.
Sapura Energy posted an 8.9 billion ringgit (US$2.11 billion) net loss for its 2021 financial year — reportedly the largest-ever loss for any Malaysian government-linked company
“Sapura is on the verge of bankruptcy, faced with dozens of bankruptcy suits filed by its vendors,” he said.
Najib added that Sapura must not be allowed to fail — if the offshore and marine giant were to go to the wall, it would take with it 10,000 “high-paying jobs” and some 4500 vendors and suppliers would also be impacted.
Other alternatives he proposed included the government providing loans to Sapura or for the contractor to be taken over by Khazanah Nasional — the Malaysian government’s sovereign wealth fund.
