With the world caught in a vicious circle of geopolitical tensions, high-stakes tariff games, emerging trade wars, climate change woes, and the need to tackle the energy security, sustainability, and affordability trilemma, technological advancement, supportive policy regulations, and integration of greener and cleaner power innovations are a bedrock of an equitable energy transition age for Malaysia’s Velesto Energy, owner of six premium jack-up rigs and two hydraulic work-over units. The firm has set its cap on growth and expansion by dipping its toes into robotics and eyeing potential deepwater plays through lease agreements.
The global markets and energy landscape continue to evolve as attempts are made to come to grips with rising challenges, including the most recent ones stemming from the tariff quest Donald Trump, U.S. President, is keen on putting into play for imports from Canada, Mexico, and China, albeit he did agree on a one-month freeze for the ones aimed at Mexico.
Trump also disclosed plans to hit the European Union (EU) with a tariff hike. These and similar moves are likely to spark trade wars, potentially resulting in a cost rise for certain goods and services in many spheres and sectors, including the energy arena.
While all regions are feeling the need to diversify their energy sources to ensure energy security and curb their greenhouse gas (GHG) emissions footprint, Asia is pinpointed as the region where significant energy growthis expected to be on the cards. The Asia-Pacific region is witnessing an oil and gas boost in Malaysia and an expansion in renewable energy projects in Taiwan and Vietnam.
Wood Mackenzie‘s ‘Energy Transition Outlook’report indicates under its base case scenario that renewable energy sources will account for 70% of the energy mix by 2050. With this in mind, the International Energy Agency‘s ‘Southeast Asia Energy Outlook 2024’underlines that eight out of ten Southeast Asia countries have set net zero emissions targets. While Brunei Darussalam, Cambodia, Lao PDR, Malaysia, Singapore, and Vietnam aim to reach net zero by 2050; Indonesia targets 2060; and Thailand aims for 2065.
Despite the growth in the renewables arena, the IEA’s long-term outlook still predicts oil and gas will account for around 40% of the energy mix by 2050, with caution needed since demand trends show a flattening from 2030 onward as the energy transition progresses. Even though the EU oil and gas demand peaked nearly two decades ago, demand from emerging markets is yet to reach its peak and may do so in the coming years.
Based on the data from the Energy Council and S&P Global, the Southeast Asia oil and gas industry is projected to experience a compound annual growth rate (CAGR) of over 4% through 2030, driven by increased industrialization and rising demand for natural gas as part of the energy transition. In a similar fashion, the Asia-Pacific region is expected to see a CAGR exceeding 6% during the same period, influenced by factors such as economic growth, industrialization, and the shift towards cleaner energy sources.
Therefore, these trends are interpreted to highlight the region’s significant role in the global energy landscape and underscore the importance of strategic planning to balance economic development with environmental sustainability.
Given the anticipated energy market growth in Asia and the increase in oil and gas activity in Malaysia, Offshore Energy decided to get Velesto’s take on the ongoing and future energy dynamics in the Asian market, with a particular focus on Malaysia. During our interview with Megat Zariman Abdul Rahim, President of Velesto Energy, who holds a Bachelor of Science in Electrical Engineering from Worcester Polytechnic Institute in the United States, three key pillars were spotlighted as the Malaysian firm’s focus areas.
These encompass digitalizationas a way for advanced technology and automation to drive efficiency and safety in operations, sustainabilityas part of the company’s efforts toward decarbonizing operations and upcoming drilling projects, and the shifting energy landscape in Asia and how Velesto is positioning itself to seize opportunities in the region. The ways to enable low-carbon and greener rigs were also discussed. Rahim is adamant that the firm’s approach takes into account key factors in navigating the energy transition by fortifying the Malaysian player’s market position and enhancing sustainability and operational efficiency.
Prior to joining Velesto, he worked for ExxonMobil’s Esso Production Malaysia, SLB, and Bumi Armada. The Malaysian firm’s President is a member of multiple associations, including the Board of Engineers and Institute of Engineers Malaysia, alongside the Malaysia Board of Technologists and Society of Petroleum Engineers. According to Rahim, gas will remain in high demand in the foreseeable future, as it is expected to be the energy transition’s crown jewel.
Velesto’s President has outlined the firm’s zest for advanced technology, confirming plans to launch a robotics arm in the first quarter of 2025 to pursue further automation efficiency. As part and parcel of its safety and sustainability agenda, the company equipped one of its jack-up rigs with red zone management. Since the Malaysian giant portrays carbon capture, utilization, and storage (CCUS) as a primary decarbonization lever to enable low-emission oil and gas production, the firm is determined to pursue this solution.
While painting a picture of the possibility of enabling zero-emission rigs, Rahim underlined the importance of taking advantage of greener alternatives to diesel, such as green methanol, to power offshore rigs and marrying carbon capture technologies and renewables to put in place decarbonization tools for a net zero journey that will enable an equitable energy transition. Such an approach is likely to allow Asia to strike a balance in its energy mix by 2050 between fossil fuels and renewables, which require a step up in the technological advancement game to bolster affordability.
Moreover, Velesto is interested in pursuing automated operations in the offshore drilling arena. In the firm’s view, tackling market volatility requires adaptability and corresponding regulations that will unleash further innovation and growth. The company believes that energy storage and offshore renewable energy will play an important part in the carbon reduction moves. The Malaysian player has set its cap on a potential expansion into deepwater operations to be enabled through lease agreements to fortify its rig fleet.
Digitalization inroads boost efficiency
Megat Zariman Abdul Rahim: Velesto’s adoption of advanced digitalization and AI technologies has redefined our offshore operations, delivering remarkable results in operational excellence, safety, and service quality.
– Operational Excellence Through Technology
Digitalization has been a key enabler in achieving 99% uptime and zero loss time injury (LTI)in 2024, reflecting our commitment to operational excellence. The implementation of advanced technologies like autonomous drilling and predictive maintenance on some of our rigs allow us to optimize operations, reduce downtime, and exceed client expectations. This is validated by recognitions and positive feedback from our clients, indicating that we have exceeded their expectations thus solidifying our position as a premium service provider for our clients.
– Increased Efficiency and Performance
Our deployment of autonomous drilling technology, the Velesto Drilling Automation System, on NAGA 4has enhanced operational performance. As we look forward, the planned introduction of a robotic armin Q1 2025 will further streamline key processes and elevate our efficiency to the next level.
– Minimizing Unscheduled Downtime
With the integration of AssetCareon NAGA 4, we have leveraged real-time monitoring and predictive maintenance capabilities, ensuring operational reliability while reducing unscheduled downtime.
– Enhanced Safety and Environmental Stewardship
Safety is integral to everything we do. The implementation of Red Zone Managementon NAGA 4 has minimized human exposure to high-risk areas, contributing to a safer work environment. These efforts align with our remarkable HSE achievements in 2024, including maintaining a zero lost time incident (LTI) recordand zero major spillsthroughout the year.
Additionally, through AssetCare, which leverages process analytics, we can understand our operational emission profile in real time, enabling more targeted interventions to reduce emissions.Through these advancements, we continue to deliver exceptional servicequality to our customers while settingnew benchmarks in efficiency, safety, and sustainability.
Sustainability pursuits to solve net zero puzzle
Megat Zariman Abdul Rahim: We see carbon capture, utilization, and storage as a key opportunity to reduce emissions and support the sustainable future of oil and gas production.
With our core expertise in drilling, we are well-positioned to contribute to CCUS initiatives by enabling safe and efficient drilling execution for COâ‚‚ injection wells and long-term storage solutions. This focus aligns with our commitment to innovation, sustainability, and advancing the energy transition.
Megat Zariman Abdul Rahim: The advancement of automated operationsrepresents a significant opportunity in offshore drilling, driving greater efficiency, consistency, and reducing uncertainty. These innovations have optimized operations by reducing human intervention, enhancing safety, and allowing for more reliable and cost-effective drilling process.
This adoption has been a key innovation for Velesto, enhancing efficiency, consistency, andsafetyby reducing human intervention and operational uncertainty.While progress has been made, automationremains an area for growth. Many operations remain manually driven, and further automation can boost efficiency, minimize errors, and ensure more consistent performance, strengthening our competitive edge.
One of the biggest challenges – which we have seen time and time again – is the cyclical nature of our industry. Business activities can increase or fall just as abruptly, irrespective of perceived fundamentals. In this vein, businesses need to be adaptable and sustainable to maintain and build on our core capabilities, despite the volatility.
Megat Zariman Abdul Rahim: Velesto, as an integral part of the energy value chain, remains committed in supporting our clients’ aspirations and goals in delivering energy security while contributing to a sustainable energy future.
Recognizing that oil and gas will continue to be essential in the global energy mix for the foreseeable future, we are dedicated to ensuring a responsible and fair energy transitiontoward cleaner energy sources.Our commitment extends to responsible service delivery, minimizing environmental impact and reducing emissions, backed by continuous operational efficiency and technological innovations.
To this, we track our emission performance against the baseline set in 2021, ensuring our operationsmeet established reduction targets, underscoring our role in minimizing environmental harm.We also actively collaborate with our clients and industry peers to identify and implement more sustainable practices in the process of hydrocarbon extraction.
Megat Zariman Abdul Rahim: Our sustainability efforts are driven by a commitment to creating lasting value for both our business and stakeholders.We understand the importance of navigating the complexities and volatility of the current business environment while prioritizing responsibility in protecting the environment and safeguarding people.
Our approach to sustainability is anchored in three key principles: Value Creation, Resilience, and Stewardship.These principles guide our actions, ensuring that we not only contribute to the growth of our business but also foster long-term positive impactsfor the communities and environments we work in.
Megat Zariman Abdul Rahim: Velesto is fully aligned with the national sustainability aspirations, as well as the strategic goals of our clients and investors. Our commitment to sustainability is reflected in both our medium- and long-term decarbonization goals.We have set an ambitious target in 2022to reduce emissions intensityby 10% per operating dayand a 30% reductionin revenue emissions intensityby2030. We are already making significant progress towards these targets.
Looking ahead, Velesto has committed to a long-term goalof achieving net zero emissions by 2050, a commitment introduced in 2024.To reach this milestone, we have been actively assessing feasible pathwaysand solutions in 2024, with plans to share more updates on our decarbonization strategyin the near future.
A key aspect of our decarbonization journey is technological advancement, particularly in the adoption ofgreener fuel alternativesand their associated power mechanisms. As diesel fuel consumption on our rigs contributes to 99% of both direct and indirect emissions from our operations, we believe that transitioning to cleaner fuels will be crucial in achieving our net zero goal.
We remain dedicated to exploring innovative solutions, continuously refining our sustainability approach, and ensuring we meet our decarbonization targets while supporting the energy transition.
Megat Zariman Abdul Rahim: The expected growth in market outlook for oil and gas in the Asia region is primarily driven by increased industrialization and the rising demand for gas as a transition energy source in support of decarbonization efforts. This trend is further bolstered by recent upstream discoveries, particularly in Malaysia and Indonesia.
These developments present significant opportunities for Malaysia to position itself as the energy hub for the region, attracting investment and facilitating long-term economic growth. With its vast resources, Malaysia is well-poised to unlock itsCCUSandcleaner energy potential, such as green hydrogen, especially when supported by the right policies like theNational Energy Transition Roadmap (NETR).
This aligns with Malaysia’s vision of meeting the energy demands of today while establishing itself as the hub for the energy of tomorrow. Velesto is well-positioned to be part of this growth, continuously advancing our technological edge through innovative partnerships(e.g., autonomous drilling technology, emission monitoring solutions), andexpanding our services across the region to support the evolving energy landscape.
Furthermore, Velesto is committed tomaintaining high sustainability practices, as evidenced by our strong ESG performance, reflected in inclusion in the Bursa Malaysia ESG Index (FTSE4Good). This dedication ensures that Velesto contributes not only to economic growth but also to the environmental growth of the region.
Megat Zariman Abdul Rahim: In the immediate future, energy demand from traditional sources such as coal and oil & gas will continue to grow, driven by population growth and rapid development in the region. While these traditional sources remain crucial, the global shift towards sustainability and net zero ambitions is gaining momentum. As more countries integrate net zero targets into their policies, the demand for cleaner energy supplies will rise significantly from 2030 onwards.
By 2050, Asiais expected to witnessa balanced energy mix, combining both traditional energy sources and cleaner alternatives. This dual approach will ensure energy security while progressively reducing environmental impacts. Rapid technological advancements will play a critical role in improving renewable energy (RE) affordability, which will be key in tipping the balance towards a more sustainable energy future.
Velesto is committed to being part of this transition, enhancing technological solutions that supportsustainable operation to continue to meet the energy demands of today.
Megat Zariman Abdul Rahim: Velesto is strategically repositioning itself as a premium rig operator,with a strong focus on operating younger, more technically competitive rigs. This approach betteraligns with market demandand enables us to deliver greater operating efficiencies, ensuring we remain competitive in an evolving industry landscape.
Additionally, we are embracing an asset-light strategy, which offers us greater flexibility to maintain and expand our operating capacity. This allows us to swiftly respond to changing market conditions, while also positioning us to seize new opportunities across the Asia-Pacific region.
By continuously advancing our capabilities and operational efficiency, Velesto is well-positioned to meet the demands of today and capture future growth in the dynamic energy sector.
Megat Zariman Abdul Rahim: Market demand for specific energy sourceswill play a pivotal role in shifting the direction of the offshore rig market. As the energy transition progresses, demand for cleaner energy solutionswill influence the evolution of offshore drilling, with a growing focus on sustainability and reduced environmental impact.
Equally important, the energy transition must be supported by harmonized regulationsthat create a clear and consistent framework for industry players.These regulations will be critical in enabling the development of advanced technologiesand ensuring their widespread adoption across offshore operations.
Such regulatory alignment will help unblock barriersto essential factors like financial allocationsand the development of advanced technologies, enabling offshore rig players to adopt cutting-edge solutions. As these advancements become more accessible, companies like Velesto will continue to innovate and integrate sustainable practices,ensuring that our offshore operations not only meet today’s energy needs but also contribute to a cleaner, more sustainable energy future.
Future endeavors toward zero-emission rigs
Megat Zariman Abdul Rahim: Technological advancement and maturity will be essential in driving the decarbonization of offshore drilling operations. The shift towards rigs powered by renewables and equipped with carbon capture technologies is certainly on the horizon, but it will depend on the suitability of these technologies to meet operational needs, including providing the optimum energy to power rigs while avoiding technological and safety disruptions.
We believe that drilling rigs will evolve towards more sustainable operations, potentially achieving zero emissions in the future along with the maturity of carbon capture and renewable energy integration. Specifically, Increasing investments in research and development (R&D) are driving innovation in areas such as green methanol, energy storage, and offshore renewable energypower hubs—all of which will be instrumental in reducing the emissions footprint of offshore drilling.
Velesto remains dedicated toadvancing such innovative solutions,as we continue to explore ways to enhance the sustainability of our operations while meeting both today’s energy demands and future environmental goals.
Megat Zariman Abdul Rahim: Headwinds in the offshore energy industry include delays in /investment, demand uncertainty, and geopolitical risks. The projected decrease in overall activity will require us to be more strategic in planning and resource allocation. These challenges necessitate flexibility in operations and increased focus on optimizing resource use to ensure continued growth.
On the other hand, tailwinds such as lower inflation and financing costs arepractical opportunities for Velesto. With lower financing costs, we can invest in advanced technologies that drive innovation and improve operational efficiency, making us more competitive. Lower inflationwill help keep operational expenses in check, providing financial stability and supporting our cost discipline initiatives. This, in turn, will enable us to focus on strengthening our margins and ensuring profitability.
Despite these headwinds, our focus remains clear: we are committed to profitability and strengthening our margins to meet shareholder expectations. Our priorities for 2025 and beyond remain unchanged:
– We will continue striving for Zero LTIand challenge ourselves to achieve zero injury incidents.
– Maintaining 99% uptimeacross our operations will remain a fundamental priority.
– Embracing innovationand advancing our technological capabilitieswill drive our competitive edge.
– We remain committed to sustainable practicesin every aspect of our operations.
Equally important is our commitment to cost discipline. In 2025, we will place a strong emphasis onreducing operational expenditure and overhead coststo improveefficiency and strengthen our financial performance, ensuring we remain agile and resilient in meeting our goals.
Megat Zariman Abdul Rahim: In 2025, drilling activity in Malaysia is expected to continue, although at a slightly slower pace compared to 2024. While exploration activities in Malaysia are experiencing some slowdown, development activities persist, despite delays in certain projects.
Currently, three rigs continue to operate with Petronas Carigali Sdn Bhd (PCSB), and there is one contract in Malaysia under negotiation. Velesto is actively expanding itspresence in the Southeast Asia. We have two rigsbiddingfor various opportunitiesin Thailand, Vietnam, and Indonesia – markets where we have previously operated. This aligns with our strategy to diversify and strengthen our regional footprint.
While maintaining a strong focus on operations in Malaysia, we are also exploring new growth avenuesin regions where we have extensive experience. By leveraging this foundation, we aim to expand into high-potential markets, positioning Velesto for long-term success in the offshore drilling sector
Velesto remains committed to expanding its servicesand technological capabilities, ensuring that we are well-positioned to meet the evolving needs of the energy sector. We will continue to pursue opportunities that align with our business models, including leveraging innovation and operational excellencein both established and new markets.
Megat Zariman Abdul Rahim: Gaswill continue to be a key componentof the energy mix in the Southeast Asia region up to 2050 and beyond, as it plays a vital role in supporting the global shift towards decarbonization. As such, Malaysia and other countries will need to either increase investments in exploration and production of oil and gas reserves or face an increasing reliance on imported energy to meet their demands.
Velesto is strategically positioned to contribute to this energy landscape through our expertise in drilling servicesand technological capabilities. We are committed to supporting Malaysia’s energy security by leveraging advanced drilling technologyand operational efficiencyto tap into domestic oil and gas reserves while reducing environmental impact.
Our focus on innovative technologies, such as autonomous drillingand emission reduction systems, further reinforces our commitment to supporting the energy needs of todaywhile contributing to a greener future. Through innovative partnershipsand continuous technological advancements, Velesto will help meet the energy demands of today while ensuring that we contribute to the energy transitionin the region and beyond.
Megat Zariman Abdul Rahim: Velesto has a strong track recordin operating jack-up drilling rigs, positioning us as a trusted and reliable partner in the offshore energy sector. Building on this solid foundation, we are evolving towards an asset-light strategy, which enhances our flexibilityand ability to expand our operating capacityinto new market segments. This strategy enables us to adapt quickly to emerging demands, ensuring we remain agile in a dynamic market.
Our commitment toinnovationis central to our growth, and we are actively developing new partnershipsto enhance our technological offerings. These partnerships will allow us to integrate cutting-edge technologies into our operations, reinforcing our competitive edge.
We place a high priority on safetyand operational excellence, which are integral to delivering superior service and ensuring the reliability of our operations. By advancing our technological capabilities and maintaining the highest standards of safetyand performance,Velesto is positioned to continue meeting the evolving demands of both current and future offshore energy markets.
Megat Zariman Abdul Rahim: Velesto is strategically focused on optimizing its operationsrather than expanding its fleet through mergers or acquisitions. We prioritize operatingyounger, more technically competitive rigsthat align with market demand and deliver greater operational efficiencies. This approach ensures sustained operational excellenceand positions us for enhanced performanceinthe long term.
To expand our operating capacity and explore new market segments, such as deepwater operations, we are exploring new partnerships, such as lease agreements, which allow us to scale without necessarily owning additional assets. This flexibility enables us to be agile in a rapidly evolving industry while maintaining focus on our core strengths.
The drilling market remains fragmented, and we anticipate continued consolidation. However, we believe this can occur not only through mergers and acquisitionsbut also via other strategic business combinationsthat align with our long-term vision. Innovationand advanced technologieswill play a pivotal role in maintaining our competitive edge, ensuring that Velesto stays at the forefront of the energy sector.
In December 2024, Velesto proactively brought forward the special periodic survey for the NAGA 8rig following a contract suspension. This initiative prepares the rig for future work offshore Malaysia or beyond,reflecting our commitment to maintaining a modern and efficient fleet.
Additionally, our collaboration with Petronasin November 2024 to implement automation and roboticson our rigs highlights our dedication to enhancing technological capabilitiesand operational efficiency. Through these initiatives, we continue to embrace innovation, safety, and operational excellence, driving our competitive edge in the industry.
Megat Zariman Abdul Rahim: The offshore industry in Asia is rapidly evolving, driven by growing energy demand, sustainability imperatives, and technological advancements. Velesto’s strategic approach aligns with these key trends to capitalize on these shifts throughinnovation, technological advancement, and strategic partnerships. To drive further growth in Asia, we believe the following pathways are essential:
– Technology as a Competitive Advantage
Technology is essential for efficiency and Velesto is at the forefront of digitalizationand automationin offshore drilling. Our Velesto Drilling Automation Systemand smart drilling solutionsare integral to our operations, enabling us to optimize performance, reduce downtime, and enhance safety. Our collaboration with SLB in leveraging advanced drilling technologies has further supported our ongoing efforts in technological innovation, helping us maintain competitiveness and efficiency in the offshore energy sector.
– Emissions Management as a License to Operate
With emissions management becoming a critical factor in obtaining a license to operate, Velesto is committed to sustainable operationsthat align with global decarbonization goals. Our partnership with Petronasfocuses on carbon management solutions, supporting our shared objective of achievingnet zero by 2050. Through emissions monitoring technologiesand ongoing operational improvements, we are reducing our environmental footprint while maintaining operational excellence, in line with both national and international sustainability standards.
– Driving Growth Through Strategic Partnerships in Asia
In the evolving energy landscape, Velesto’s strategic partnerships with leaders like SLB and Petronasare crucial to our success. These collaborations enable us to leverage innovative technologies, expand our service offerings, and explore cleaner energy solutions. Our work with SLB advances drilling technologies, while our partnership with Petronasfocuses on sustainable offshore practices. These alliances strengthen our position in Asia’s energy transition, positioning Velesto at the forefront of offshore operations and the shift to cleaner, more sustainable energy.
Megat Zariman Abdul Rahim: Geopolitical tensions have always had a significant impact on the global energy landscape, and Asia, as a key energy hub, will certainly not be immune to these shifts. Rising geopolitical risks can affect energy supply chains, market stability, and access to resources, which may result in price fluctuations and uncertainties. However, the impact will depend on how the energy industry adapts to these challenges.
For Velesto, the key is to maintain operational resiliencein the face of such volatility. We understand the critical nature of providing reliable, secure energy solutions, especially in times of uncertainty. Our strategic approach centers on diversifying services and enhancing operational efficiencies across the region to ensure wecontinue to meet the energy demands of today while preparing for future energy needs.
Byleveraging our technological capabilities in automation and digitalization, we are better equipped to optimize drilling operations and reduce dependency on external factors, making us less vulnerable to geopolitical disruptions. Additionally, we are continuously focused on sustainability and reducing emissions, aligning with global energy transition trends, which adds a layer of stability in a shifting energy market.
As geopolitical dynamics evolve, Velesto remains committed to navigating these risks with agility, ensuring we maintain high levels of service excellence and continue to deliver value to our clients and stakeholders. Our collaboration with clients and our ongoing investments in innovation and sustainable practices will enable us to thrive, even in the face of rising geopolitical tensions.
Megat Zariman Abdul Rahim: The rig market is undergoing significant change, driven by rapid technological advancements, an increasing focus on sustainability, and shifts in global energy demand. Velesto is positioning itself to not only navigate these changes but to lead in shaping the future of the industry. By embracing innovative solutions, we aim to meet the challenges of today while proactively preparing for the demands of tomorrow. Our approach ensures that we are not just adapting to industry trends, but actively influencing the direction of the market through sustainable practicesand technological excellence.
In line with our commitment to sustainability, Velesto has continued to focus on reducing our carbon footprint, leveraging automation, and improving the technological capabilities of our rigs. For instance, we are enhancing our fleet’s energy efficiency and integrating digital solutions that allow for smarter, data-driven decision-making. This is not just about meeting current market needs but also anticipating the energy transition and supporting the shift toward cleaner energy sources.
Our business model is evolvingin response to market trends, with a strong emphasis on expanding our service offerings andinnovative partnerships. We are working alongside clients to explore solutions that drivesustainable oil and gas production, while also embracing alternative energy opportunities. Additionally, collaboration is key as we explore ways to integrate CCUS technologies, which are essential for decarbonization efforts in the industry.
As we focus on the future, Velesto’s vision for the future is centered around leveraging technological innovation, operational excellence, and sustainability to ensure we are not only contributing to the energy needs of today but also playing a pivotal role in shaping the future of energy.
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