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Wednesday May 11, 2011

Petronas to announce RM50bil complex in Johor

By RISEN JAYASEELAN and JEEVA ARULAMPALAM
starbiz@thestar.com.my


PETALING JAYA: Petroliam Nasional Bhd (Petronas) will announce on Friday plans to invest around RM50bil in an integrated downstream oil and gas complex in Pengerang, Johor, reliable sources said.

Dubbed Rapid or Refinery And Petrochemical Integrated Development, the project is aimed at building something “larger than Kertih” and will eventually include multinational oil and gas companies as joint-venture partners.

The integrated development will not only include oil refining and petrochemical activities, but include a gas power plant and other “supportive industries” said sources.

Rapid is a project identified in the Economic Transformation Programme (ETP), which is led by the Performance Management & Delivery Unit (Pemandu).

One of the reasons why Pengerang was chosen is because its waters can reach depths of more than 20m, which is what is needed for very large crude carriers (VLCC) and ultra large crude carriers.

The Johor government will be a joint-venture partner of the project and will provide the land.

Sources indicate that Petronas' Rapid project complements plans for the RM5bil independent deepwater petroleum terminal in Pengerang, which is to be the first deepwater terminal in South-East Asia.

The terminal is a tankage facility for handling, storing, blending and distribution of crude oils and petroleum products with marine facilities capable of handling VLCCs.

Part of the thinking behind Rapid was to replicate what Singapore has already done successfully, sources said. Singapore's oil refining businesses only started around 10 years ago.

Singapore has an export refining capacity of 1.3 million barrels per day, compared with Malaysia's 560,000 barrels per day, according to the ETP roadmap.

Singapore Refining Company Pte Ltd, which operates a refinery on Jurong Island, is capable of processing 290,000 barrels of crude oil per day.

Other major refineries in Singapore include ExxonMobil's refinery in Jurong that process about 605,000 barrels of crude per day and Shell's Pulau Bukom Refinery with some 500,000 barrels of crude oil per day.

Plans for Petronas to develop Johor's Pengerang into a sizeable force in the oil and gas (O&G) space are not new.

Last November, the Government said Petronas would play a major role in the development of Johor's south-east areas of Teluk Ramunia and Pengerang into a O&G hub in the region.

It was then said that the investments in the hub would come from Petronas and its international partners and the investments would bring major development into Johor's south-east areas and could turn Teluk Ramunia and Pengerang into a new Kertih.

Petronas chief executive officer Datuk Shamsul Azhar Abbas confirmed then that Petronas was talking with several international investors to invest in Teluk Ramunia and Pengerang.

Once a sleepy fishing village in Terengganu, Kertih is now a thriving township due to O&G related activities with Petronas as the main driver in the O&G sector there.

The Petronas Kertih Refinery is the national oil company's first oil refinery in Malaysia, and processes 49,000 barrels of Malaysian light, sweet crude oil per day.

In total, Petronas owns and operates four refineries (three in Malaysia and one in South Africa) with a total refining capacity of more than 448,000 barrels per day.

The Government had also said then that while the investments would come from Petronas and its partners, the Government was looking into allocating money for infrastructure developments in the areas.

Another aspect of the oil and gas thrust in the ETP (and which is linked to the Rapid project) is for Malaysia to venture into the lucrative area of oil trading. Singapore accounts for hundreds of billions of oil trading every year, an area of business that is virtually absent in Malaysia.

According to the ETP roadmap, Singapore, by 2007, had built a significant trading business worth more than RM1 trillion in physical oil trade and RM2 trillion in derivative trade.

Sources said the Government may consider providing additional incentives to attract oil trading firms to be located in Johor.

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