The Future of Offshore Energy: A Vision for Sustainability and Innovation

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 growth is 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 digitalization as a way for advanced technology and automation to drive efficiency and safety in operations, sustainability as 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

• Digitalization and AI are becoming increasingly popular in offshore energy operations. How has Velesto benefitted from deploying advanced technologies and what are some areas in which the company aims to enhance its performance with such solutions in the future?

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 lost 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 4 has enhanced operational performance. As we look forward, the planned introduction of a robotic arm in Q1 2025 will further streamline key processes and elevate our efficiency to the next level.

– Minimizing Unscheduled Downtime
With the integration of AssetCare on 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 Management on 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) record and zero major spills throughout 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 service quality to our customers while setting new benchmarks in efficiency, safety, and sustainability.

Sustainability pursuits to solve net zero puzzle

• Which technological advancements in the energy sector do you consider as core business opportunities to unlock further growth?

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 CO₂ injection wells and long-term storage solutions. This focus aligns with our commitment to innovation, sustainability, and advancing the energy transition.

• What do you perceive to be the height of innovation in the offshore drilling arena so far and where do you see more room for improvement in the local and global rig markets? What are the biggest challenges the market needs to tackle?

Megat Zariman Abdul Rahim: The advancement of automated operations represents 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, and safety by reducing human intervention and operational uncertainty. While progress has been made, automation remains 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.

• In some regions of the world, the emphasis is more on energy security than the transition to low-carbon and zero-emission sources of supply. How is Velesto tackling this energy dilemma?

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 transition toward 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 operations meet 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.

• What drives Velesto’s sustainability efforts? If you had to use only three words to describe these endeavors, which ones would you pick?

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 impacts for the communities and environments we work in.

• Could you shed more light on the company’s main short-term and long-term sustainability plans, taking into account Malaysia’s net-zero by 2050 target? Is there a particular decarbonization tool that you believe will be the key to reaching this goal?

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 2022 to reduce emissions intensity by 10% per operating day and a 30% reduction in revenue emissions intensity by 2030. We are already making significant progress towards these targets.

Looking ahead, Velesto has committed to a long-term goal of achieving net zero emissions by 2050, a commitment introduced in 2024. To reach this milestone, we have been actively assessing feasible pathways and solutions in 2024, with plans to share more updates on our decarbonization strategy in the near future.

A key aspect of our decarbonization journey is technological advancement, particularly in the adoption of greener fuel alternatives and 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.

• Given the forecasted shift in the oil and gas market toward Asia, how can Malaysia, and Velesto in particular, take advantage of a greater focus on the region to secure further economic and environmental growth and inroads?

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 its CCUS and cleaner energy potential, such as green hydrogen, especially when supported by the right policies like the National 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), and expanding our services across the region to support the evolving energy landscape.

Furthermore, Velesto is committed to maintaining 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.

• In which direction is Asia’s energy landscape heading, and which sources of energy supply will dominate up to 2050 and beyond?

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, Asia is expected to witness a 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 support sustainable operation to continue to meet the energy demands of today.

• Which avenues is Velesto pursuing to future-proof itself and seize opportunities across Asia, particularly within the Asia-Pacific region?

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 better aligns with market demand and 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,