UMW Holdings Bhd expects the oil and gas sector, into which it began a serious push five years ago, to contribute a quarter to its bottom line for 2007 compared with 20% last year.

UMW managing director Datuk Dr Abdul Halim Harun said the greater contribution would come from the pipes plants in China and Malaysia and also the exploration rig Naga 1.

“We will see the full impact of the semi-submersible drilling rig, Naga 1 (formerly known as Hakuryu III), which is 50:50 co-owned by UMW Drilling Company Ltd and Japan Drilling Company Panama Inc.

“The rig, which is deployed in waters off Sarawak, underwent several months of refurbishment last year,” he told FinancialDaily recently.

Its Chinese plant Wuxi Seamless Oil Pipe Co Ltd, which is en route to a listing in Hong Kong, has expanded its capacity to 720,000 tonnes from 220,000 tonnes annually.

“Our oil and gas division has performed beyond my expectations. From last in terms of contributions from the four divisions after automotive, equipment and manufacturing, the division has leaped to second place in the third year, and now we are pushing it to be the top earner,” Abdul Halim said.

He said UMW’s wholly owned subsidiary UMW Petropipe (L) Ltd had firmed up the deal with Standard Drilling ASA of Norway to jointly own a drilling rig, Naga 2.

The rig costing UMW US$95 million (RM332.6 million) is being built in Batam, Indonesia, and will be ready in 2008. It will be deployed in regional or international waters.

Last November, UMW Petropipe signed a letter of intent with Standard Drilling to negotiate the joint ownership, marketing and operation of two jack-up rigs.

Abdul Halim did not dismiss the possibility of the company owning more oil rigs.

He said UMW wanted to repeat its success in China in its oil and gas ventures in India, Vietnam and the Middle East, mainly in the upstream business.

Abdul Halim said UMW would increase its investments either via mergers and acquisitions, joint ventures or greenfields. “The amount we will be investing will depend on the projects,” he added.

On its automotive division, he said subsidiary UMW Toyota Sdn Bhd had projected conservative sales of 80,000 units this year compared with 81,500 units sold last year.

The company missed its 2006 target of 100,000 units due to changes in the car market environment following the unveiling of the National Automotive Policy (NAP).

The value of second-hand cars dropped substantially after prices of new cars were reduced under the NAP.

The tighter financing rules imposed by finance companies and intense competition from automotive companies introducing new models are other reasons for UMW Toyota’s cautious outlook.

“If people start accepting the value of the used car, then we will see a pick-up in demand for new cars,” Abdul Halim added.

source : www.theedgedaily.com