PETALING JAYA: Local oil and gas (O&G) industry players have mixed reactions to the Government's measures to encourage mergers and acquisitions (M&A) among the 1,000 Petronas-licensed vendors.

Budget 2008 proposed to exempt stamp duty on all instruments relating to mergers of such vendors implemented by Dec 31, 2010.

KNM Group Bhd head of corporate affairs and company secretary Terence Yeoh said the merger recommendation was more suitable to encourage smaller companies to be more resilient and not be too dependent on local demand.

“As far as KNM is concerned, the bulk of our revenue is export driven and only 5% to 7% comes from the local market,” he said, adding that the company, nevertheless, had its own criteria in relation to M&As.

“The target company must have the required technology, come from a different industry sector or is in a geographical location that we want to be present in. Above all, the merger must also be profitable,” he added.

Yeoh said the O&G process equipment manufacturer understood the Government's move was for local O&G companies to be more competitive in the global market since the industry was booming.

“For example, Petrobras in Brazil has allocated US$112bil in capital expenditure for oil, petrochemical and mineral processing in the next five years,” he said.

Another licensed Petronas vendor, Alam Maritim Resources Bhd said the measures were good for companies to expand, as O&G was a capital-intensive industry.

The offshore support vessel owner and operator's group financial controller Md Nasir Noh said M&As would accelerate local companies' venture into the global market.

“Also, it's not good to put all your eggs in one basket,” he said, adding that the company had also ventured into Qatar and Indonesia.

However, he added that M&As on a large scale would create monopoly in the industry.

“I think that Petronas may prefer healthy competition among its vendors in terms of pricing.

“The cake is still big enough for locals to be in the domestic market. Currently, 60% to 65% of our O&G industry is dominated by foreign players,” he said.

Aseambankers senior analyst (equity markets) Liaw Thong Jung said the move was forward-thinking in encouraging companies to go up the value chain as well as improving the competitiveness of companies in terms of experience, track record and resources.

“Such a scheme has already started with Dialog Group Bhd teaming up with Wah Seong Corp Bhd.

“Potential M&As emerging in the near term include shipbuilders teaming up with vessel operators,” he added.