This article first appeared in The Edge Financial Daily on March 21, 2018 - March 27, 2018

KUALA LUMPUR: Baker Hughes Inc expects to see flat to moderate growth in sales in Malaysia, which is its major market in Asean, this year.

While regions, such as Africa and Latin America, are seen picking up this year, exploration and production in the Asia-Pacific region continue to face a challenging environment as costlier technologies are required, said Baker Hughes Asia-Pacific president Visal Leng at a media briefing yesterday.

Although the off-field services provider is currently discussing more budgetary proposals in Malaysia compared with the same time last year, it has not seen any expansion of budgets so far from its partners, said Khurram Majeed, Baker Hughes vice president for turbomachinery and process solutions in Asia-Pacific.

“But because of the momentum, we expect to see more projects in the second half of 2018 and in 2019 although no major player has announced any big investment decisions yet,” he said.

Despite this, Malaysia remains the regional headquarters and a key market for Baker Hughes, Leng said.

An oil and gas services arm of General Electric Co, Baker Hughes’ overall investment in the Asia-Pacific region in exploration and production has been flat over the past year, but the group has increased its headcount for remote monitoring and diagnostic services, Leng said.

The group has, however, recorded its highest level of investments in technology on a global level, according to Majeed, pointing out that this will see the development of new technologies which will benefit its partners in Malaysia.

“Overall, we’re quite cautiously optimistic about a slow and steady global recovery in the oil and gas sector this year,” Leng said, adding that Baker Hughes would focus on its operations in Southeast Asia and China.

This is despite a low oil price environment that appears to be “here to stay” in the near future as the industry also faces pressure from the renewable energy sector, he said.

After rising steadily since July 2017, the higher-than-expected increase in US crude inventories sent the price of Brent crude oil tumbling in February from a three-year high of over US$70 (RM274.40) per barrel to a year-to-date low of US$62.59. The price has since remained rangebound between US$63 and US$68 this month.

A pickup in US shale production and higher exports of liquefied natural gas to the Asia-Pacific region could also add competitive pressure on players here, Leng noted.

“US exports compete with traditional oil exporters in the region such as Malaysia, Indonesia and Australia,” he said, adding that there is “still a question mark” over how regional producers will be affected.

While the traditional players continue to have the advantage of lower transportation costs in the Asia-Pacific, Majeed said that US exports would definitely make for a more competitive price environment.

“On top of that US shale production has suppressed oil prices, and that has added to pressure in Malaysia as well,” said Majeed, pointing out that national oil company Petroliam Nasional Bhd is committed to lowering production in line with the agreed cuts by the Opec.

According to Baker Hughes’ website, the number of rigs in the US had increased by 201 or 25.48% to 990  year-on-year as at March 16 this year. This marked the seventh time US energy companies added oil rigs in the past eight weeks, Reuters reported.

Comparatively, there was an increase of 38 rigs internationally to 979 as at February 2018.

Baker Hughes aims to continue working with its partners to produce new technologies that can lower operating costs, even as it remains wary of material cost increases.