Malaysia:

Your Oil & Gas Trading Hub

by

Danial Mah Abdullah CEO, Labuan IBFC

Oil Prices – Low

Oil Production – Still Increasing…

3 Source: BP Statistical Review of World Energy 2015

Global oil production (1989-2014)

Global Refining Capacity is Growing

4

Distillation

Conversion

Refining Growth Even in APAC

5

Asia Pacific crude distillation unit additions (2014-2018)

6

Production and Prices

Low oil prices, but production continues to rise

Source: Macrotrends.net, OPEC

30

40

50

60

70

80

90

100

110

65000

66000

67000

68000

69000

70000

71000

72000

73000

74000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

World crude oil production Crude oil prices, WTI

(1,000 b/d) USD

7

Demand for Storage Space is Increasing

Rise in oil stock in storage

“In the second half, every tank and swimming pool in the world is going to fill (up)”

International Petroleum Week

8

Notwithstanding: Trading is Increasing!

30

40

50

60

70

80

90

100

110

25,000

30,000

35,000

40,000

45,000

50,000

55,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Futures (WTI) - trade volume Crude oil prices, WTI (RHS)

1,000 lots USD

Source: ICE, Macrotrends.net

9

Oil & Gas in Malaysia

National Key Economic Areas

Why Malaysia for Oil and Gas Trading?

GROW DIVERSIFY

SUSTAIN

1. Enhanced oil recovery

2. Develop small fields

3. Increase exploration activities

Make Malaysia #1 Asian hub for oil field services

9. Reduce energy bill through energy efficiency

10. Build up solar power capacity

11. Ensure best practice nuclear deployment

12. Drive industrial growth in Sarawak with big hydro

13. Increasing petrochemical output

Build alternative energy capabilities

4. Create a regional oil storage and trading hub

5. Unlock latent gas demand through LNG import

Grow in downstream Continue domestic oil and gas production

6. Encourage investment in oil and gas industry (DDI + FDI)

7. Local companies successful in going overseas

8. Attract MNCs to bring global operations to Malaysia

EPPs

There will be an increase in volume moving in and out of the countries of this region

This region will still drive global petroleum product growth

50

143

199

208

213

384

1,547

4,576

Philippines

Malaysia

Vietnam

Thailand

Indonesia

Singapore

India

China

Why Malaysia for Oil and Gas Trading?

There will be demand for petroleum product storage and trading in this region for the next decade.

Petroleum products growth 2010-2020 KBD

China, India, Southeast Asia petroleum import and export KBD

SOURCE: FACTS 2010

3,850 4,200 4,200

3,750

4,600 5,200

9,400

2020 2015

8,800

2010

7,600 +1,800

Export

Import

China, India, SEA

49

Rest of the world

51

Growing: Refining, Storage, and Transit Terminals

13

Malaysia's existing and planned refineries :

Refinery Operator Capacity (bbl/d)

Existing LNG terminals

Melaka 1 (PSR-1) Petronas 95,000

Melaka 2 (PSR-2) JV between Petronas and ConocoPhillips 125,000

Port Dickson Shell 145,000

Port Dickson San Miguel/Petron 85,000

Kertih Petronas 121,000

Kemaman Kemaman Bitumen Company 20,000

Planned projects

Johor (RAPID project)* Petronas 300,000

*The RAPID project is part of Johor’s Pengerang Integrated Petroleum Complex

Source: EIA, MPRC

Increasing Storage in Johor (South Malaysia)

▪ There is a demand to build storage capacity for the region

▪ Facility would complement Singapore, which currently is the only major independent terminal and storage facility in South East Asia

▪ Potential for an oil trading business, future development of downstream industry including refinery and oil based petrochemical complex, and LNG regas terminal

Opportunity

Singapore

Malaysia

Pengerang (5) Singapore

Independent Storage Capacity 10 Million m3

Limited land for new major storage investments

Tanjung Bin (3)

Tanjung Langsat (2)

(Million m3 capacity planned to 2020)

South Johor can complement Singapore to form an oil co-hub with 10 Million m3 if all the potential projects comes online

The Global Incentives for

Trading Programme

(GIFT)

Trading Through GIFT

The GIFT programme is established to encourage global petroleum trading companies to use Malaysia as a platform to enter the Asia Pacific region market.

• The GIFT Programme is managed and supervised by the Labuan Financial Services Authority (Labuan FSA), the regulatory authority for Labuan IBFC

• The Malaysia Petroleum Resources Corporation (MPRC) and Labuan IBFC Inc., promote the GIFT programme

• Companies that participate in the GIFT programme are licensed as Labuan International Commodity Trading Company (LITC)

• LITC-status companies can trade in petroleum, petroleum-related products, and selected commodities, including minerals and carbon credits and operate from anywhere in Malaysia

Overview

Global Incentives For Trading Programme (GIFT)

Qualifying Products

1. Petroleum and petroleum-related products including liquefied natural gas and coal*

2. Agriculture products 3. Refined raw materials 4. Chemicals 5. Base minerals

* Can deal with residents in any currency other than Ringgit Malaysia

Qualifying Criteria

1. Minimum annual turnover of USD100 million 2. Minimum annual business spending to Malaysian residents of

RM3 million 3. Min 3 professional traders employed throughout its operations with

minimum salary of approximately RM15,000 per month each Exempted to comply for the first 5 years from the date of license

• Initiative to transform Malaysia into a commodities hub • Attract global companies trading in selected commodities to locate their regional operations to Malaysia • The participants (LITC) may engage in any physical and derivatives trading of qualifying products, which

include over-the-counter (OTC) and exchange-governed transactions

Corporate Tax and Incentives of GIFT

• 3% flat tax rate on chargeable profits Corporate Tax

Key Incentives

• Flexibility to establish its operational office(s) everywhere in Malaysia • 100% exemption on director fee paid to non-Malaysian director • 50% exemption on gross employment income of non-Malaysian

professional, managerial staff including the traders • Exemption on dividends received • Exemption on royalties received • Exemption on interest received • Exemption on stamp duty on all instruments for Labuan business

activities, M&A of Labuan company and transfer of shares

Salient Operational Requirements

• Maintain sufficient capital/working funds • Maintenance of a registered office in Labuan • Indicate clearly it is a LITC licensed under Labuan Financial Services

and Securities Act 2010 in its relevant documents including signage • Ensure the business is conducted with proper corporate governance

and risk management framework • Comply with all the relevant laws/requirements in Labuan IBFC or

jurisdictions that the LITC operate in

Operational Requirements

Annual Submission

• Completed Annual Update Submission Form • Audited financial statements

Annual Fee

• License fee RM40,000 or USD13,000 • Company

i. Labuan company RM2,600 or USD800 ii. Foreign Labuan company RM5,300 or USD1,500

Licensing and Incorporation

• Can be made directly by applicant / Labuan trust company / other service provider to Labuan FSA • Application forms can be obtained from Labuan FSA’s website or Labuan trust company – Form

FLB

Licensing Application

• Appoint a Labuan trust company for the incorporation of LITC • Share capital must be in any currency, other than Ringgit (RM) • Registration fee for Labuan companies with paid-up capital:

i. Less than RM50,000 RM1,000 or USD300 ii. RM50,000 but less than RM1 million RM2,000 or USD600 iii. Exceed RM1 million RM5,000 or USD1,500

• Registration fee for foreign Labuan company RM6,000 or USD2,000

Incorporation of LITC

Comply with the operational requirements, annual submission and payment of annual fee imposed by Labuan FSA

Undertake trading activities

Application Process

Trade

Incorporation of LITC via a Labuan Trust Company

Obtain Approval from Labuan FSA

Application for Approval to Labuan FSA

Appoint a Labuan Trust Company as Adviser

Malaysia’s Cost Efficiency

Marina Bay Financial Centre

USD10 psf

Accountant 5 years exp

USD64k

GTP 5-10%

KL USD3 psf

Accountant 6 years exp

USD30k

GIFT 3%

CBD USD9 psf monthly

Accountant 5-7 years exp

USD130k

Corporate Tax 8%-22%

CBD USD4 psf monthly

Accountant 5-9 years exp

USD 236k

Corporate Tax 0%

SINGAPORE MALAYSIA GENEVA DUBAI

The cost of doing business in Malaysia is comparatively low compared to other major trading hubs.

GIFT Companies

Comparison of Schemes

GIFT (established 2011)

GTP* (established 2001)

Tax Rate 3% 5% 10% 10%

Period Not Limited 5 years

renewable 5 years

renewable 3 years

non-renewable

Annual Turnover USD100m USD1.5b USD150m USD50m

Annual Business Spend RM3m SGD50m SGD4m SGD1.5m

Hiring of Professional Traders

3 18 4 2

ASIA PACIFIC’S

MIDSHORE INTERNATIONAL BUSINESS

AND FINANCIAL CENTRE

Where is Labuan?

Off the coast of Sabah, East Malaysia Federal Territory About 100,000 population Common time zone with major cities Where business meets leisure

What is Labuan IBFC?

• International business and financial centre

• A tax-efficient jurisdiction to facilitate businesses, trading, investments etc., through financial services and legal structures

• Well-balanced legal and regulatory framework

Our Vision To be Asia Pacific’s leading midshore international business and financial centre

Striking an ideal balance between client confidentiality and international best standards

Connecting Asia’s Economies

70% of

Labuan Companies are Asian-based

(as at 2015)

Internationally Recognised

Group of International Finance Centre Supervisors (GIFCS) Member since 1999

International Organisation of Securities Commissions (IOSCO) Member since 2003

Group of International Insurance Centre Supervisors (GIICS) Member since 1999

International Association of Insurance Supervisors (IAIS) Member since 1998

Islamic Financial Services Board (IFSB) Member since 1998

Asia/Pacific Group on Money Laundering (APG) Member since 2000

Labuan IBFC Adheres to OECD’s International Standards and Best Practices

International Islamic Financial Market (IIFM) Member since 2002

Comprehensive Legislation

Labuan Financial Services and Securities Act 2010

Labuan Islamic Financial Services and Securities Act 2010

Labuan Foundations Act 2010

Labuan Limited Partnerships and Limited Liability Partnerships Act 2010

Labuan Business Activity Tax Act 1990

Labuan Financial Services Authority Act 1996

Labuan Trusts Act 1996

Labuan Companies Act 1990

Unique: One Country, Two Tax Systems

Labuan Business Activity

• Trading income taxed under Labuan Business Activity Tax Act 1990

• Non-trading income, not taxable

• Investment income, not taxable

• 3% per annum or maximum of RM20,000 per annum

• Tax efficiency via yearly election

• Tax certainty via statutory perpetuity

• Irrevocable election provided

Non-Labuan Business Activity

• Income taxed under Income Tax Act 1967

• Tax rate at 25%* on Malaysian source income

• Applicable for all domestic trade

(* YA 2015)

An Ecosystem of Solutions

Services

• Banking

• Insurance – risk management

• Corporate secretarial

• Legal

• Administrative activities

• Trusteeship

• Accounting

Structures

• Holding company

• Trading company

• Protected cell companies

• Company limited by shares and guarantee

• Limited partnership

• Limited liability partnership

• Trusts

• Foundations

Available in conventional and Shariah-compliant forms

Marketing offices may be located in Kuala Lumpur or Iskandar Malaysia (north of Singapore)

Business Activities

Banking (57)

•Wholesale banking

•Investment banking

•Loans/deposit

•Financial guarantees

•Trade finance

Leasing (359)

Companies (11,630)

• Investment holding

• Trading

•Life/general

•Broking

•Captives

•Re-insurance

Insurance (209)

•Company incorporation

•Company administration

•Corporate secretarial

•Trustee services

Trust Cos. (39)

•Aviation

•Shipping

•Heavy machinery

Wealth Management

(more than 300)

Commodity Trading

(39)

•Business succession

•Estate management

•Legacy planning

•Oil and gas

•Agriculture

•Minerals

SOURCE: STATISTICS FROM LABUAN FSA’S ANNUAL REPORT 2014

Why Labuan IBFC?

Business Purpose

• In the centre of Asia • Member of ASEAN • Established trade and investment

location • Developed legal infrastructure and

support services • Tax efficiency and flexibility • Over 70 double taxation agreements • Malaysia/Labuan: 18th in the world for

ease of doing business

Substance

• Cost efficient • Operational and commercial substance

(adheres to international standards in regulation and exchange of information)

• Local expertise • No minimum or maximum substance

requirements, thus flexible to fit business needs

• Provision for co-located office in onshore Malaysia

• English-speaking talent

25 Years and Growing…

• Reputation and Track Record

• Connecting Asia’s Economies

Thank You Thank You

Disclaimer

This presentation should not be regarded as offering a complete explanation of the matters referred to and is subject to changes in law. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Labuan IBFC cannot accept any responsibility for loss occasional to any person acting or refraining from action as a result of any material in this presentation. The republication, reproduction or commercial use of any part of this presentation in any manner whatsoever, including electronically, without the prior written permission from Labuan IBFC Inc. is strictly prohibited.

LABUAN IBFC INC SDN BHD IS THE OFFICIAL AGENCY ESTABLISHED BY GOVERNMENT OF MALAYSIA TO POSITION LABUAN IBFC AS THE PREFERRED INTERNATIONAL BUSINESS AND FINANCIAL CENTRE IN ASIA PACIFIC