KNM eyes South Africa as stepping stone for West Africa foray

SERI KEMBANGAN: KNM Group Bhd (KNM) has formed a joint venture with a subsidiary of Aveng Group, a leading infrastructure developer in South Africa, to enable KNM to tap the potential of the fast-growing oil and gas industry in the western Africa region.

In the past, KNM exported its process equipments to various companies from the African continent for the exploration and processing of O&G there. Now, managing director Lee Swee Eng said the group intends to set up an operation base in South Africa to better serve the region’s O&G sector. Total investment committed by KNM in the joint-venture company is about RM17 million.

“Our intention is to use that as a stepping stone to enter the West African region. The West African region has quite a lot of potential for O&G. Currently we have no projects in the country, but we have been following some projects in the region such as Angola, Algeria, Nigeria and also Mauritania,” Lee said.

According to the group’s senior corporate development manager Michael Lee, the joint-venture company is setting up a process equipment manufacturing plant in South Africa so that it doesn’t have to export from its plants in Malaysia or elsewhere for projects implemented in the region. The manufacturing plant, he said, would be set up in either a leased building or to build from scratch, as the plan has not yet been finalised.

KNM expects the overseas projects to contribute the most to its tender book, Lee said. He added that almost 90% of the group’s RM5.5 billion order backlog has been from overseas markets, with the group having secured several big ticket projects such as in Peterborough, UK and Uzbekistan.

However, with the renewed interest and investment activity in the domestic O&G industry especially in the downstream sector, Lee said the group stands a good chance in securing some of these projects because of its standing as the leading process equipment manufacturer for the O&G industry in Malaysia.
Lee: We intend to set up an operation base in South Africa to better serve the region's O&G sector.

“Obviously Malaysia has been quite quiet for us in the last few years because there has been not much activity in Malaysia where we are strong in, besides the regular boys in the offshore side.

“Now with the investment from Petronas for Rapid in Johor, with some other projects coming up in Sabah, fertiliser and urea plant, we think KNM stands a good chance in winning some of those projects because among the local companies we are the leading player in this business,” he said.

For the year ahead, Lee said the group expects to chart a better year compared with 2010, as the group is expected to be busy throughout the year with its order backlog at RM5.5 billion as at end of May 2011, as well as a tender book of RM17 billion which is higher than last year’s RM11 billion.

“I think generally the outlook for KNM is looking better than 2010, we have a really strong order backlog and the market has also rebounded back with the price of oil in the range of US$90 (RM272.70) per barrel, there is of course more activity in the industry sector,” Lee said after the group’s AGM yesterday.

Lee is confident that the group also will see a busy 2012, with some of the projects stretching until 2014 such as the project in Peterborough, UK and also in Uzbekistan, which stretches for two years and four years respectively.

According to Lee, the project in Peterborough is delayed because the project owner hasn’t completed the funding required for the project to take off.

“Definitely we are hoping this year to be better… even if you say that the UK project is delayed, there is more than enough order backlog for us to sustain. Total order backlog of RM5.5 billion, if you take out UK project (RM2.2 billion) then you are still looking at RM3.3 billion of order backlog, which is strong compared with our previous years,” he explained.