KUALA LUMPUR (March 23): Petroliam Nasional Bhd's (Petronas) announcement of a sterling 2021 performance has caused "confusion and dissatisfaction" in the oil & gas (O&G) industry, as it showed a great disparity between the financial performances of the national oil company and other firms in the supply chain, said the Malaysian Oil & Gas Services Council (MOGSC).
The industry group said that while Petronas had been resilient in overcoming the crisis and even recorded one of its best quarterly performances, the public-listed O&G companies, on the other hand, had been showing negative performances.
"Compounding this, most of the small and medium enterprises (SMEs) which became subcontractors and vendors to the larger companies are now facing severe financial conditions with most of them having negative cash flow and losses," said MOGSC in a statement.
"The ecosystem of the O&G industry in Malaysia is not in a healthy state, despite Petronas' performance," added the council.
It said the SMEs — which account for 60% of the industry — were the worst hit, despite them providing services to the main contractors that are contracted with Petronas or other oil producers.
MOGSC said some of these SMEs had to take up financing facilities from financial institutions to continue providing their services to the main contractors, and when there are defaults or delays in payments, they would have to face legal suits from financial institutions, suppliers and principals.
These SMEs, which are subsidising or financing the main contractors and clients, are now facing financial difficulties and legal implications, despite completing their work.
To shed light on the issue, MOGSC organised the SME Round Table Forum on March 23, attended by representatives of over 70 participants, which inked a memorandum highlighting the issues faced by the SMEs in the industry.
"These include protecting the local companies in Malaysia in order to continue being an integral part of the ecosystem, addressing current liquidity issues in the market, establishment of a responsible contracting strategy to protect the supply chain, vendor development programmes and financing assistance to the SME companies," the industry group said.
"We hope with this memorandum, the stakeholders, mainly the government, will take action on the suggestions put forth by the SME companies," said MOGSC.
Source: https://www.theedgemarkets.com/article/despite-petronas-sterling-performance-other-og-players-still-suffering-says-industry-group