THE government’s RM1.1 billion investment in Sapura Energy Bhd (SEB) has been hailed as a crucial lifeline for vendors grappling with severe cash flow problems, stemming from overdue payments amounting to more than RM10 million.
Mohd Erwan Ahmad, Chief Operating Officer of Keyfield International Bhd, said that the overdue debts had caused significant financial strain on companies, particularly when payment delays from SEB occurred in the latter half of 2021, during the peak of the COVID-19 pandemic.
“We had payment obligations to settle, and the situation was extremely challenging. However, we managed to survive and are grateful that we didn’t have to lay off staff,” he said in an interview with Bernama.
“To avoid project delays due to these outstanding payments, we had to work very hard,” he added.
Erwan believes the government’s intervention in SEB has come at a crucial time, and is essential for the survival of the vendors, given the magnitude of the sums involved and the number of affected businesses.
“This investment will restore much-needed confidence across the entire supply chain, and all suppliers will continue to collaborate with SEB to contribute to the development of the local oil and gas industry,” he said.
Meanwhile, Muhammad Khairul Rijal Khalid, Managing Director of Classic Marine Services (M) Sdn Bhd, acknowledged the widespread impact of the pandemic on various industries, including SEB, which was not immune to financial difficulties.
“The delayed payments to vendors, including ourselves, have had a significant impact on the industry ecosystem,” he explained, adding that SEB still owes Classic Marine approximately RM11 million for the period of ship leasing from 2021 to January 2022.
He also noted that his company was fortunate because the ship owners, based in Singapore, understood the situation and did not impose penalties for the payment delays.
“Without that understanding, the situation for us would have been much more difficult,” he said.
On March 11, SEB secured a RM1.1 billion investment from Malaysia Development Holding Sdn Bhd (MDH) through a subscription of redeemable and convertible loan stocks (RCLS). MDH, a special-purpose entity under the Ministry of Finance (Incorporated), stipulated that the proceeds from this subscription would be used exclusively to settle SEB's liabilities owed to local service providers in Malaysia, operating within or supporting the country's oil and gas sector.
On March 13, Prime Minister Datuk Seri Anwar Ibrahim stated that the RM1.1 billion injection was aimed solely at resolving SEB’s debt with its vendors, involving approximately 2,000 small and medium-sized (SME) oil and gas companies, the majority of which are Bumiputera-owned.
“This financing is part of SEB's restructuring efforts and is intended to support local workers who have not been paid for an extended period. It is also critical for preserving the local oil and gas industry ecosystem,” he said.
Restoring Confidence in Sapura Energy After Meeting 2023 Commitments
Erwan reflected that when it was first reported in early 2022 that SEB would seek court protection and cease payments to creditors and suppliers for completed work, confidence in the company was lost.
“However, with a new management team, we have gradually regained that trust because Sapura has kept its promises since 2023,” he said.
“We are now more confident in SEB’s ability to continue paying and fulfilling contracts in the future, with the capital injection helping to resolve longstanding debts,” Erwan added.
With renewed confidence in SEB, Keyfield International plans to maintain a close working relationship with the company moving forward.
Meanwhile, Muhammad Khairul Rijal, who views the government’s funding injection into SEB as a crucial step for the survival of the local oil and gas industry, recognised the significant role SEB has played in supporting the growth of his company since its inception in 2012.
“Back in 2012, about 80% of our ship leasing contracts came from SEB. Although this figure has now reduced to 60-70% due to the addition of new clients, SEB remains one of the major contributors to our operations,” he explained.
“Oil and gas is a high-risk industry, and the main issue is that very few investors are willing to take that risk. Banks also find it difficult to provide financing due to the uncertainty in the industry,” he said.
Therefore, he believes the government’s investment in SEB represents the last hope for the industry, as no other parties are willing to invest. Without it, he fears the local oil and gas sector will be dominated by foreign companies, as local businesses may not be bold or competitive enough to survive.
Tackling Overdue Debt and Supporting the Local Oil and Gas Ecosystem
Meanwhile, Captain Rajendra, Managing Director of Ruhm Marine Sdn Bhd, highlighted how the company’s high outstanding debts have disrupted operations, with prolonged payment delays affecting cash flow.
“Although we have managed to retain our workforce, we had to implement cost optimisation measures. This, in turn, has affected our capital and operational expenditures,” he said.
As a company entirely reliant on Malaysia’s upstream oil and gas sector, Rajendra believes that the government’s intervention is critical to preserving the sustainability of the local oil and gas ecosystem, ensuring its resilience and continuity.
Rajendra also believes the investment will help restore confidence in the industry, ensuring the continuity of projects and stabilising vendor operations.
“However, concerns regarding the long-term financial health and systemic issues within the sector may still persist. It is important for SEB to reflect on the challenges faced in the past and learn from them to strengthen its operations going forward,” he concluded. – March 16, 2025
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