This article first appeared in The Edge Malaysia Weekly on June 7, 2021 - June 13, 2021

THE Teluk Ramunia fabrication yard in Johor, which measures 170 acres and fronts the sea, is one of the largest purpose-built fabrication facilities in the region that caters for the oil and gas (O&G) industry.

It is suitable for any company undertaking complex and multiple heavy duty structures for offshore exploration activities. It can undertake the construction of structures of up to 85 metric tons for O&G exploration and drilling activities.

However, the Teluk Ramunia yard is proving to be a jinx for any company that takes ownership of it.

A former investment banker who managed the yard in the 1990s recalls having difficulty in handling its sale because of land issues with the owners of the hinterland.

“The yard is built on reclaimed land, but the hinterland is all private land. During the early days of Promet, the hinterland was inevitably handed over to the company after years of legal squabbles. It was not handled well and left many land owners cursing the yard,” he says.

Promet Bhd folded up during the 1998 financial crisis and Pengurusan Danaharta Sdn Bhd took over the yard. Since then, it has changed ownership several times.

But the various owners have not been able to fully capitalise on the yard’s prospects. Instead, they fell on bad times and tend to go through a difficult patch. At least one of the companies folded up and never went back into the O&G business.

The advantage of the yard is its sea-fronting position that allows easy off-load of large fabrication structures on barges. Its location on the southern tip of Johor, close to Singapore, gives it a competitive advantage for Malaysian companies bidding for jobs in the island republic, which is known for its fabrication yards.

From Promet, the Teluk Ramunia yard changed hands to Ramunia Bhd, which sold it to Sime Engineering Sdn Bhd. Petroliam Nasional Bhd (Petronas) bought it from Sime Engineering in 2012 and then sold it to Serba Dinamik Bhd last year.

All these companies have not been able to capitalise on the yard’s potential. In fact, they all fell on hard times, no matter how strong they were in the O&G sector.

Between 2012 and last year, Petronas was the owner of the yard. In the eight years that it was owner, the national O&G company experienced tough challenges, especially from mid-2014 when crude oil prices fell.

Petronas went through two management changes at the senior level and undertook a staff rationalisation scheme to reduce its operating cost. It cut its dividend to the government and its profits dropped 50%, particularly in 2015 and 2016.

Serba Dinamik took over ownership of the yard from Petronas for RM320 million in a deal that was completed in December last year. The rationale for the purchase was to position the company as a total solutions provider for the onshore, offshore and marine businesses.

Serba Dinamik also said that the Teluk Ramunia yard would qualify the company to participate in sizeable works in the areas of decommissioning, offshore transport and installation, integrated hook-up and commissioning services, and topside maintenance.

The yard is also located close to Petronas’ Refinery and Petrochemical Integrated Development (Rapid), which Serba Dinamik said would be to its advantage in positioning itself as a complete marine and offshore engineering services provider.

However, hardly six months after acquiring the yard, Serba Dinamik’s fortunes have changed from being a darling of the O&G sector to a stock that funds are selling out due to accounting issues.

The yard was developed in the late 1980s and 1990s under Promet. The company fell into financial difficulties in 1996 and Danaharta took it over.

Datuk Azizul Rahman Abdul Samad, a lawyer by training, saw the potential in the Teluk Ramunia yard and bought it from Danaharta around 2001. The yard was one of the key assets when he listed Ramunia on the second board in late 2004.

Ramunia showed decent profits in the years 2006 and 2007. However, in 2008, it recorded a huge loss that was much more than the profits accumulated in the preceding three years. The losses were largely due to cost overruns, cancellation of projects and impairments.

After 2008, Ramunia became a takeover subject, mainly because of the yard.

A deal was completed in April 2010 whereby Sime Engineering bought the yard for RM530 million. The listing status was taken over by TH Engineering Bhd.

A month later, Sime Engineering itself was in trouble — incurring a loss of RM2 billion — due to its projects in Qatar. The loss caused the entire top management of Sime Darby Bhd, led by Datuk Seri Ahmad Zubir Murshid, to lose their jobs.

Sime Darby shut down the O&G unit and sold the yard to Petronas. From Petronas, it changed hands to Serba Dinamik.

An O&G executive says the Teluk Ramunia yard is more difficult to work at compared with other yards.

“Hardly anyone stays there for long. The frequent changes in ownership is only one reason. The other is because they are not comfortable with the environment of the yard,” he adds.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.