Exploring excellence in service industries

Malaysia is currently a net exporter of oil, exporting 230,300 barrels per day (bbl/d), and has proven reserves of 3 billion barrels, roughly enough for 12 years at its current production rate of 690,000 bbl/d. Although a lack of recent discoveries has led to declining reserves and forced the national oil company, Petronas, to embark on an international exploration and production strategy (overseas operations now make up nearly one-third of their total), the Asian Development Bank sees the Malaysian sector as an attractive proposition for foreign investors in the short and medium term as rising world oil prices and a strong regional demand for energy offer opportunities for the country. Indeed, various new exploration agreements have been signed over the past few months.

Malaysia’s natural gas reserves are more plentiful and production has been rising steadily in recent years. The country possesses 87.5 trillion cubic feet of reserves that are expected to last another 35 years. Apart from the industry’s upstream opportunities, the Malaysian oil and gas sector has begun to spawn excellent homegrown service industries, which provide U.S. investors with alternative choices. A case in point is Wah Seong Corporation, today the world’s third-largest pipe coating company, and Scomi Group, which provides drilling fluids and engineering services to the upstream sector. Both are examples of Malaysian companies that have successfully expanded beyond their borders and are now establishing their names on the global marketplace.

Fast growing Malaysian company exceeds economic expectations on global arena

A global focus provides the basis for the robust and diversified growth strategy of WSC, the world’s third largest pipe coating company today

An Oil and Gas Service Infrastructure Group based in Malaysia, Wah Seong Corporation Berhad (WSC) perfectly embodies the spirit of the Malaysian government’s Vision 2020 – the creation of robust, internationally competitive companies that excel both in their corporate culture and in their business activities. Founded in just 1994, WSC is today among the top three pipe coating companies in the world and a leading company in the Asia Pacific region, having diversified businesses with a wide range of activities including infrastructure , industrial engineering and building materials. CEO and pioneer Chan Cheu Leong (INTERVIEW) says that the Group’s rapid growth throughout the last ten years has been boosted by the assistance of the Malaysian government. He comments, “The partnership between the Malaysian government and the private sector under the ‘Malaysia Incorporated’ concept has been extremely rewarding, and we have benefited from this policy, which aims to help Malaysian companies develop their own capability so they can compete in the global market.” Mr. Chan continues, “It gave us a helping hand at the start, which allowed us to develop a good track record and this in turn has increased our chances of being awarded jobs in the international arena.”

Since its inception, WSC and its group of companies have grown from strength to strength, building diversified and dynamic industries along the way. WSC’s Oil and Gas Division currently contributes around 75% of the Group’s profits, and its main activity is the provision of highly specialized pipe coating to the international oil and gas industry such as fusion bonded epoxy, polyethylene and polypropylene, internal flow coating, asphalt enamel and concrete weight coating. It also boasts a 60% -70% share of the domestic market at home. In addition, WSC manufactures high quality spiral welded steel pipes and concrete piles both for the oil and gas industries, and for infrastructure use.

CHAN CHEU LEONG CEO and pioneer of Wah Seong Corporation INTERVIEW

The Group’s Industrial Engineering Division designs and fabricates process equipment and industrial plants, and is betting on technological capacity building to fuel its expansion in the ASEAN (Association of South-East Asian Nations) region and to help it take advantage of AFTA (Asian Free Trade Area). The construction of spiral concrete piles and the trading of building materials represent the business of WSC’s Building Materials Division, which is expected to increase its activity significantly in the near future due to good prospects for growth in the Malaysian building and construction sector.

WSC has a substantial global presence and a diverse client portfolio that includes a number of international companies. Mr. Chan states, “We work with most major oil companies, such as BP, Shell, and Exxon. We also work with all the major EPC (Engineering Procurement and Construction) contractors, pipe manufacturers, and international trading houses.” The Group expects to benefit from Petronas’ expansion into Africa, Russia, the Middle East, and Central Asia. Additionally, in 2003, WSC’s Industrial Engineering Division completed a successful expansion in Latin America, Africa, and Indonesia, and its Oil and Gas Division continued with its expansion and growth into ASEAN, China, and the Middle East.

WSC’s investments in China have enabled it to gain a firm footing in the fast-growing and energy hungry Chinese market, and the country should continue to provide substantial opportunities for the Group. Mr. Chan remarks, “Since 2002 we have successfully laid the groundwork for our investments in the oil and gas industry in China, and we believe China’s climb as a global economic powerhouse will continue well into the future.” Simultaneously, WSC intends to further its presence in the Middle East, Central Asia, and Africa.

According to Mr. Chan, WSC has a five-year plan to convert the Group from a medium-sized Malaysian industrial group to a major Asian, if not global, oil and gas service infrastructure group. He states, “Our primary strategy is to globalize, and we have identified the oil and gas sector to be the catal-yst for our growth. So far we have been focusing on pipe coating and other oil and gas related services. Going forward, we intend to broaden our activities in other oil and gas related services. Additionally, we have adopted a business model based on the development of technology, branding, and distribution capacity to transform the company and to increase our competitiveness.”

WSC bases its success on strategic mergers, acquisitions, and joint ventures, and continues to be open to new partnerships. Mr. Chan comments, “Basically it’s about getting the right people to run the business and to help you expand. We need strategic alliances; if we are able to acquire a majority equity share in a company, we can provide the management and financial infrastructure to help the business grow, and then use that base to grow further. We have adopted this strategic alliance approach in most of our acquisitions, such as in the Middle East and in China where we have set up Wah Seong China with an American partner.” Mr. Chan says that WSC is also interested in entering the U.S. market by forming joint ventures with American companies there.

Based on WSC’s track record, its vision of becoming a global leader seems entirely plausible. The company has registered a yearly growth of around 40% since it was established, even during the Asian financial crisis of the late 1990s. In addition, WSC’s share of the domestic market has quadrupled since 1994. Total revenue for the Group in 2004 is projected at $200 million. More importantly, WSC is betting on the fact that the Asia Pacific region will account for a disproportionate share of the world’s future growth in energy demand. WSC has estimated that more than 43,000 miles of offshore pipeline are likely to be installed globally over the next five years, about 25% of which will be installed in Asia.

Mr. Chan explains, “I see the demand for oil and gas to be strong throughout the next five to ten years because of fast growing economies like China and India. Also, for the last ten to fifteen years, the oil and gas industry has under-invested. This means there will be more and more exploration and production activities, and hence, new business opportunities for us.”