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Petronas approves new USD27 billion Malaysia project for refining and chemicals

April 08/2014

MOSCOW (MRC) -- Petroliam Nasional Bhd., Malaysias state oil and gas company, will proceed with a plan to invest in a USD27 billion refining and petrochemicals project in the southern Johor state bordering Singapore, as per Hydrocarbonprocessing.

The proposed Pengerang Integrated Complex will comprise of a refinery and petrochemical development and other associated facilities, Petronas said after its board approved the investment decision. The project is poised for its refinery startup by early 2019, it said.

The latest decision may help a push by Malaysia to turn the fishing town of Pengerang into an oil and gas hub. It comes after Taiwans Kuokuang Petrochemical Technology Co. in December ended a plan to build a USD12 billion petrochemicals project in the same area.

"Petronas undertook a rigorous review of the project, including independent third-party assessments to ensure it meets our criteria for long-term profitable and sustainable growth," CEO Shamsul Azhar Abbas said. "This decision is in line with our commitment to capital discipline."

The refinery and petrochemical integrated development is estimated to cost about USD16 billion, Petronas said. Associated facilities including raw-water supply and power co-generation plants, and a liquefied natural gas regasification terminal, will involve an investment of about USD11 billion, it said.

The Petronas project, announced by Prime Minister Najib Razak in 2011 and initially scheduled for 2016 completion, has encountered problems acquiring land and relocating residents. The Malaysian company was reviewing the costs and potential returns of the development as Kuokuang, a unit of Taiwanese state-run refiner CPC Corp., dropped plans for its project.

Kuokuang said in December its plan to build a refinery, naphtha cracker and other plants in Pengerang was no longer competitive as a shale gas boom drove down the production cost of petrochemicals in the US and expansion in China had led to an oversupply.

Petronas may not proceed with the investment in Pengerang if the costs and returns prove unfavorable, Shamsul said Aug. 26.

BASF also ended plans last year to jointly develop specialty chemicals manufacturing facilities with Petronas in the same area after both companies disagreed on terms. Petronas later signed a letter of intent with Germanys Evonik Industries for a similar partnership.

As MRC informed previously, in July 2013, Petronas signed an agreement with Eni-controlled Versalis to jointly own, develop, construct and operate elastomer plants within Petronas'  proposed refinery and petrochemical integrated development (RAPID) complex in Pengerang, Johor. The agreement signed with Versalis is the fourth-such arrangement secured by Petronas for RAPID. Prior to this, Petronas inked similar agreements with Germany-based BASF, ITOCHU Corp. of Japan and Thailand's PTT for various high value-added downstream chemicals.

Petronas, short for Petroliam Nasional Berhad, is a Malaysian oil and gas company wholly owned by the Government of Malaysia. The Group is engaged in a wide spectrum of petroleum activities, including upstream exploration and production of oil and gas to downstream oil refining; marketing and distribution of petroleum products; trading; gas processing and liquefaction; gas transmission pipeline network operations; marketing of liquefied natural gas; petrochemical manufacturing and marketing; shipping; automotive engineering; and property investment.
Author:Margaret Volkova
Tags:oil, petrochemistry, BASF, Eni S.p..A., Itochu, Petronas, PTT Chemical, Malaysia.
Category:General News
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