Serba Dinamik Annual Report 2018

SERBA DINAMIK HOLDINGS BERHAD ANNUAL REPORT 2018 87 Figure 4-3: Projected Growth in Natural Gas Demand Region OECD DCs Eurasia Global Region OECD DCs Eurasia Global 2017 – 2023 CAGR 0.1% 2.3% 1.8% 1.2% 2015 - 2040 CAGR 0.6% 3.3% 0.5% 1.7% Figure 4-2: Projected Growth in Crude Oil Demand CAGR = Compound Annual Growth Rate; OECD = Organisation for Economic Cooperation and Development; DC = Developing Countries (Source: OPEC) O I L A N D G A S compared to USD54.39 per barrel in 2017. Similarly, LNG prices also showed signs of recovery, with average prices increasing by 23.7% from USD8.61 per million BTU in 2017 to USD10.65 per million BTU in 2018. This was mainly supported by OPEC’s production control coupled with robust oil consumption demand. The recovery of oil and gas prices increased market participants’ optimism and encouraged oil and gas development projects. Some of the notable developments within the oil and gas industry since January 2018 include: The Libra Field in Brazil with an estimated investment of USD91 billion is expected to hold around 8-12 billion barrels of recoverable oil. The Johan Castberg Project with an estimated investment of USD5.92 billion in Norway is exploiting reserves of approximately 450-650 million barrels. The Claire Ridge with an estimated investment of £4.5 billion in the United Kingdom is expected to produce 120,000 barrels of conventional oil per day. The Bahrain LNG Terminal project with an estimated investment of USD741 million in Bahrain is constructing the Middle East’s first LNG receiving and regasification terminal. However, despite the overall recovery of Brent crude oil price in 2018, global oil prices fell below USD60 per barrel as the end of the year approached amid weakened demand for oil. In addition, increased production in the US, which hit a record high of 11.7 million barrels per day in November 2018, also had significant price ramifications. In response to the price fluctuations, OPEC and key non-OPECmembers agreed to further extend the production cut agreement to June 2019 in an effort to stabilise the oil market. Given that the global oil and LNG prices are sensitive to many other factors such as geopolitical issues, our business is not significantly impacted by the fluctuation of prices as long as oil and gas plants are still in operation. Maintenance, repair and overhaul (MRO) and inspection, repair and maintenance (IRM) services are mandatory servicesthatarerequiredtoensuresmoothplantoperations. They are needed regardless of oil price movements, so long as plants are operational. Machineries and equipment are needed in the upstream sector comprising exploration and production, midstream sector in terms of pipeline and vessel transportation of oil and gas, and downstream sector in the refining of crude oil, processing of gasses and manufacturing of petrochemical products. Figure 4-2 and 4-3 depicts the projected demand for crude oil and natural gas. Malaysia Malaysia is our main market in terms of revenue contribution, accounting for 28% of our total revenue for FYE2018. A substantial proportion of these revenues was generated from the oil and gas industry. As such, Malaysian oil and gas industry developments have an impact on our business.