Malaysia: Plummeting oil prices poses challenges for Pengerang to get new investors


KUALA LUMPUR: The planners of the multi-billion ringgit oil and gas (O&G) hub in Pengerang, Johor, are finding it difficult to secure investors for its later phases as global players rein in investment plans in light of plummeting oil prices.

“Under the current environment, investors are holding back their investments. It is very tough to find the ‘second’ Petronas (Petroliam Nasional Bhd) to come in to invest more than RM100bil in the Pengerang Integrated Petroleum Complex (PIPC),” said Johor Petroleum Development Corp Bhd (JPDC) chief executive officer Mohd Yazid Ja’afar.

The PIPC plan is to house oil refineries, petrochemical plants, a naphtha cracker, a liquefied natural gas import terminal and a regasification plant over 20,000 acres of land in the southeast of Pengerang in the Kota Tinggi district in Johor.

Speaking at a luncheon talk organised by MIDF Amanah Investment Bank Bhd’s yesterday, Yazid said: “Integrated (O&G) players will be looking at their books and asking themselves if they can ride out the storm. So, we expect to see a slow down of investments coming in”.

It had been reported earlier that due to the slumping price of crude oil, major players such as BP, Royal Dutch Shell, Chevron, Norway’s Statoil and Australia’s Woodside Petroleum have collectively shelved some US$200bil of their planned capex .

Yazid said the JPDC was reviewing its masterplan for PIPC, which was finalised back in 2010.

“Every five year we would need to review the masterplan for PIPC and we plan to do that this year, taking into account the current scenario,” he said, adding that the target to make PIPC as a regional O&G storage and trading hub by 2035 could be postponed.

“We will have an updated masterplan for PIPC ready by next year,” he said.

Still, Yazid was quick to add that projects within the PIPC that had already secured investment commitments, were proceeding according to schedule.

“The first phases by Petronas and Dialog Group Bhd are within schedule and these projects are expected to be fully completed by 2019,” he said.

The first big project within the PIPC is a RM5bil Pengerang Independent Deepwater Petroleum Terminal (PIDPT), which is a joint-venture between Dialog, Royal Vopak of the Netherlands and the Johor state government. The total planned storage capacity at PIDPT is for five million cu m by the year 2020.

The second mega-project within PIPC is Petronas’ Pengerang Integrated Complex (PIC) plan which carries a committed investment of RM89bil. This includes the RM60bil Refinery and Petrochemical Integrated Development or Rapid project.

Yazid added that on a positive note, the PIPC was focused on the downstream sector of the O&G industry, which tended to benefit from lower oil prices, especially oil refineries.

Yazid said the phase one of PIPC takes up 38% of land area and RM128bil investment had been committed from the private sector.

On the question of whether Petronas was going to slow down its investments in PIPC, Yazid said: “Petronas has not told us of any slow down of investments at PIPC”.

It has been reported that Petronas is planning to cut RM50bil from its operating and capital expenditure (opex and capex) and defer some of its projects amid the plunge in oil prices.

Petronas started its cost cutting measures since the last quarter of 2014 when it projected that the oil price decline would remain for some time. Last year Petronas cut 30% in its capex and 20% off its opex.

“We hope that the current projects at PIPC would have a spillover effect to attract more investment in the future,” Yazid said.

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