Oil price spike not welcome: Scomi exec

It will not be good for the industry if the price goes beyond US$100 (RM354) a barrel, says Scomi president for oilfield services division

HIGH oil prices may be good for oil and gas (O&G) companies but a spike is not preferable, a senior Scomi Group Bhd executive said.Scomi president for oilfield services division Steve Bracker believes a price range of US$60-US$80 (RM212.4 to RM283.2) a barrel is more reasonable, particularly for industry supporting firms like Scomi.

He thinks that it will not be good for the industry if the price goes beyond US$100 (RM354) a barrel, or even worse, copy an all-time high of over US$140 (RM495.6) a barrel in early 2008."When oil price gets too high, everything will get costlier as well," he said in an interview during the 2009 Oil and Gas Exhibition in Kuala Lumpur recently.

"For us, the current level of about US$70 a barrel is already extraordinary. We had times when the price was a low of US$12 (RM42a barrel in the 1990s."We were not happy when it breached US$140 (RM495.6) a barrel last year.

It was a major knock on everybody," added Bracker, whose oilfield services division accounts for nearly three quarters of Scomi's revenue.Like many ancillary O&G firms, Scomi is facing shrinking top and bottom lines because of the global economic downturn.

Bracker's division has seen revenue drop 40 per cent, bogged down by slower activities in the US."On average, the industry there has slowed by about 50 to 60 per cent. During its peak, the US had some 2,000 oil rigs.

Now, there are about 880 rigs."He, however, said the division's activities in other key markets like Malaysia, India and Indonesia are sustaining."We are holding on there as these countries are looking at long-term strategies to further develop their sector. There are enough offshore activities in the five- to six-year horizon," he said.

With revenue growing 6.2 per cent to RM1.53 billion last year, the oilfield services made up 72.9 per cent of Scomi's turnover.The division's net profit, however, plunged 51.9 per cent to RM50.74 million last year.

It provides ancillary services like drilling fluids and drilling fluids engineering services, as well as drilling waste management services for oil majors like Shell, ExxonMobil and Petronas.Bracker is optimistic that Scomi will bounce back next year, especially in the second half."

The year 2010 will be better for us. We have grown a lot in the past three to four years. In these current trying times, it's best to take a breather, look at yourself and rationalise for the next growth cycle," he said.