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Oil and Gas

Kota Minerals & Chemicals Sdn. Bhd. ("KMC"), the main company under SCOMI's Oil & Gas division, was incorporated in 1982 as a marketing agent for chemicals, barite and bentonite. Over the years, KMC has enhanced its resources and transformed itself into an internationally renowned drilling fluids company. KMC's main business activities include: the provision of drilling fluids and related engineering services for drilling operations to the upstream oil & gas industry; the supply of production chemicals to the upstream oil & gas industry; the supply of industrial chemicals to the downstream oil & gas and general industries; and the provision of onshore Total Drilling Fluids Management Plant System. KMC has collaborated with major multinational Production Sharing Contractors ("PSC") in Malaysia, such as Petronas Carigali Sdn Bhd, ExxonMobil Exploration and Production (M) Inc, Sarawak Shell Berhad/ Sabah Shell Petroleum Company Limited (Shell) and in 2004 Murphy Oil Ltd. On the international front, KMC has provided services to, amongst others, Premier Petroleum Myanmar Limited, Greater Nile Petroleum Operating Company Ltd, White Nile Petroleum Operating Company and Pacific Tiger Energy Inc. To date, KMC has been involved in the drilling of over 800 offshore wells, involving multi-lateral, tri-lateral,

horizontal, deepwater, extended reach and HTHP (high temperature high pressure). All these wells used KMC's specially formulated water based, oil based and synthetic based drilling fluids systems. In 2003, it introduced Ester based drilling fluids - a bio-degradable and environmental-friendly drilling fluids base derived from palm kernel oil. The innovative product was first used by one of KMC's customers, Sarawak Shell Berhad for drilling of extended reach deep and directional wells. KMC has three local branch offices in Malaysia, which are situated in Kemaman, Miri and Labuan, and international branches in Sudan and Myanmar. KMC currently has a support base of 220 employees, of which 80 are trained drilling fluids engineers. Its drilling fluids engineers are stationed on a full-time basis at its clients' rigs. They essentially formulate, develop and analyse the drilling fluids systems in use and determine the required treatments that can optimise drilling operations. The milestones of KMC's dynamic expansion in 2003 were: appointment by Cognis Oleochemicals (M) Sdn Bhd as the distributor for the OMC 586 Ester joint venture in Thailand contract award by Petroleum Myanmar Ltd Premier

proposed acquisition of Oiltools International Ltd ("Oiltools") (completion expected in 2004) joint venture with Crest Petroleum Berhad ("Crest") for the marine vessel transportation business KMC's value proposition lies in its vast experience and domestic dominance in the drilling fluids and related engineering services business of the oil & gas industry. Throughout the years, KMC has established a 16-year business relationship with Petronas, Malaysia's national oil company. KMC is fully licensed by Petronas to provide services and supply equipment to numerous petroleum exploration and production companies in Malaysia, an endorsement of its proven track record. KMC has comprehensive facilities at Malaysia's supply bases in Kemaman, Miri and Labuan. The main features of its extensive facilities include: barite mill to process raw barite into powder form blending facility to blend KMC's specially formulated drilling fluids chemicals fully equipped chemical laboratories warehousing facility exceeding 88,000 square feet drum crushing facility to compact used drums

acquisition of OBM Terminal Sdn. Bhd. contract renewals for its three existing PSC contracts in Malaysia. 51

Oil and Gas


service and support to all its customers. Not only does it supply chemicals, it also offers services that caters to customer needs such as: chemical monitoring product development & trouble shooting comprehensive technical support An important feature of KMC's facility at the Kemaman Supply Base is the Total Drilling Fluids Management Plant System ("TDFM") for which KMC, through its subsidiary OBM Terminals ("OBM"), holds the exclusive rights until the year 2011. TDFM is an onshore support services for drilling fluids, which include the following: storage facility for base oil storage facility for used oil based drilling fluids mixing facilities for oil based drilling fluids conditioning of used oil based drilling fluids recycling of used oil based drilling fluids The total storage capacity for base oil and used oil based drilling fluids at the facility is 30,000 barrels. KMC, through its subsidiary Sosma Sdn Bhd ("Sosma"), is also a reputable industrial and production chemical supplier. Combining its wide technical experience and expertise with good support from international chemical producers and manufacturers, Sosma is able to provide premium complete outsourcing of production chemical supply monitoring of chemical usage and performance optimisation integrated chemical management supply

and 40% equity respectively in the joint venture company, Oilserve Marine Sdn Bhd (formerly known as Wira Kukuh Sdn Bhd) is involved in the provision of marine vessel transportation services to the oil & gas industry. The scope of services include the charter of marine vessels and crew for the following: offshore exploration oilfield production & development vessels and tanker mooring ocean tows, anchor handling & rig moves offshore structure maintenance rig & platform standby fire fighting and rescue transportation of supplies KMC's good performance record with the PSCs over the past 16 years and the stringent quality control procedures implemented throughout its operations ensure that its products and services conform to the high standards expected by all its customers. As testament to its best practice, together with its emphasis on safety, KMC has recorded the following: achieved a maximum of 6 million man-hours of zero "Lost Time Accident" recipient of the ExxonMobil's annual Safety Award for 12 consecutive years since 1992

management of the Health, Safety and Environmental issues The proposed acquisition of Oiltools by SCOMI, completion of which is expected in 2004, will have great impact in terms of value for KMC. The Drilling Waste Management ("DWM") products and services, which is the main business of Oiltools, are synergistic to KMC's existing business activity. With the completion of this acquisition, KMC will be able to provide its customers with unique packaged services, which works as a one-stop-shop for the provision of overall drilling fluids products, equipment and engineering services. In diversifying into complementary businesses within the oil & gas industry, SCOMI has ventured into a new area of business - Marine Vessel Transportation services. Through a joint venture with Crest, both SCOMI and Crest have 60%


OHSAS 18001 certified by Det Norske Veritas ("DNV") awarded the Enterprise 50 award in 1999 and 2002

OHSAS 18001

facilities, plans and coordinates KMC's HSE programme. The department continuously conducts trainings and refresher courses as well as audits the HSE compliance at each KMC location throughout the year. Beyond these internal duties, the department also represents KMC at all its clients' HSE contractor meetings to ensure that it is always in compliance with current HSE requirements.

KMC's competitive advantages and strengths lie in its innovative products and services, wide experience in the drilling fluids industry, competent workforce and superior services. Most importantly, is KMC's proven track record with high emphasis on safety and its ability to continuously meet the challenges of the specialised and dynamic oil and gas industry.

Functions of Drilling Fluids To carry cuttings to the surface To balance formation pressure To cool and lubricate drilling

KMC has a dedicated Health, Safety and Environment ("HSE") department, which looks into the OSHA requirements and plans activities to implement and continuously improve its internal safety standards. The activities under the HSE Plan include:


bit and drill string To stabilise well bore To minimise reservoir damage To facilitate cementing and completion

Shakers and Setting Tanks

Leadership & Commitment Policy & Strategy Objective


Organisation Standards & Objectives Hazard & Effects Management Planning & Procedures

Mud Pumps

Inflow Drilling Fluids Outflow Drilling Fluids Casing



Implementation & Monitoring Audit & Management Review


centrifuge Drilling Fluids Tanks Drill Bit Drilling Fluids recycle direction

Borehole (Open hole)

The department monitors all of KMC's

formation to be drilled



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