Malaysia: Pengerang Integrated Complex gets green light

PIC, RAPID ‘green light’ to boost Malaysia’s O&G sector
Jonathan Wong and Yvonne Tuah Borneo Post 5 Apr 14;

KUCHING: Petroliam Nasional Bhd (Petronas) has recently announced that it has approved the Final Investment Decision (FID) for the development of the Pengerang Integrated Complex (PIC) which comprises of the US$16 billion Refinery and Petrochemical Integrated Development (RAPID) and associated facilities.

Overall, analysts pegged positive sentiments on the ‘green light’ to the project, with some stating that the project would further strengthen Petronas’ position and stimulate Malaysia’s oil and gas (O&G) sector.

CIMB Investment Bank Bhd’s research arm (CIMB Research) in a report, commented; “We are thrilled that PIC and Rapid, a cornerstone project of the government’s Economic Transformation Programme (ETP), will progress as scheduled with no investment cutbacks.

“The project will further strengthen Petronas’s position as a key player in the Asian chemicals market, focusing on key growth areas of differentiated and specialty chemicals and capturing the growing automotive, pharmaceutical and consumer products sectors.

“Domestically, the project will contribute towards meeting the growing demand for petroleum products and Euro 4M and Euro 5 specification fuels.”

Similarly, the research arm of Public Investment Bank Bhd (PublicInvest Research) in a separate report, viewed that the initiative of the project is expected stimulate domestic O&G production, growth in downstream ventures and to make Malaysia the No.1 hub for oil field services while exploring alternative energy sources.

However, MIDF Amanah Investment Bank Bhd’s research firm’s (MIDF Research) analyst Aaron Tan cautioned that although the development is a positive catalyst in the industry, it remains cautious as there are some unresolved near term teething problems such as the relocation of villages and settlements, relocation of Muslim and Chinese cemeteries, sporadic land acquisitions and water supply issues.

In addition, Tan highlighted, “Apart from these short term stumbling blocks, a greater risk would be the potential construction of the Kra Canal (now known as the Thai Canal) which will pass through southern Thailand.

“The length of the proposed canal could range from a mere 50 kilometres to 100 kilometres, bypassing over 1000 kilometres distance around Peninsula Malaysia and Singapore.

“Recently, media sources reported that three Chinese firms have formed a work team to start preliminary operational activities on this canal.

“The Chinese firms are Sany Heavy Industry Co Ltd, Xuzhou Construction Machinery Group Co Ltd, and Guangxi Liugong Machinery Co Ltd.”

Nevertheless, Tan observed that while the construction of the PIC will not directly benefit most of the Bursa-listed O&G players as most are upstream service providers, the project would benefit oil and gas civil contractors and manufacturer such as Dialog Group, KNM Group, Muhibah Engineering and Eversendai, amongst other.

In a separate report, Ta Securities Holdings Bhd’s research arm (Ta Research) highlighted that direct beneficiaries of PIC include Petronas Chemicals (PChem) on the back of significant new refining and petrochemicals capacity from RAPID. It also said that Petronas Gas will also benefit from increased volumes from the new regasification terminal within PIC.

However, earnings for PChem will only materialise from 2019 onwards upon startup of the refinery said Ta Research, noting “we believe that PChem should not encounter difficulties in funding RAPID’s capital expenditure (capex) requirements given its robust cash flow generation capability, strong balance sheet that is devoid of debt, conservative dividend policy, and chunky cash pile of RM10.1 billion.”

Indirect beneficiaries of RAPID include EPCIC contractors, fabricators, and O&G equipment suppliers, including SapuraKencana, MMHE, TH Heavy Engineering, Pantech Group, KNM Group, and so forth.

These contractors, whom will be involved in PIC’s construction phase, will be first to benefit from order flows to fill their respective orderbooks. “We understand that completion of RAPID in 2019 coincides with the period where petrochemicals prices are expected to experience an upcycle. Therefore, this will provide a much needed boost to PChem’s earnings.”

To note, Petronas’ partners with interests in RAPID, include Evonik Industries AG, Italy’s Versalis SpA, Japan’s Itochu Corp, and Thailand’s PTT Global Chemical PCL, which will announce their respective FIDs in due course.

Ta Research explained that PIC will be built on a 6,242-acre site, and comprises part of the larger Pengerang Integrated Petroleum Complex (PIPC). PIC consists of a 300,000 barrels per day (bpd) refinery and a petrochemical complex with a combined production capacity of 7.7 million tonnes per annum (tpa).

Petrochemicals that will be produced include differentiated and specialty chemicals products such as synthetic rubbers and high grade polymers.

It further added that PIC will commence construction upon full handover of the project site by the Johor state government. Based on current progress, the refinery will likely commence operations by early 2019.

Upon completion, PIC will require over 4,000 employees at its operational stage.

“In–line with our expectations, RAPID’s project value was downscaled to US$16 billion from US$20 billion announced earlier. However, this is partially offset by investments in associated facilities worth US$11 billion,” said Ta Research.

Petronas in a press release, said that the PIC is part of the larger PIPC proposed and promoted by the Johor.

“With its strategic location along one of the world’s busiest shipping lanes and its proximity to international trading hub, the PIPC is well positioned to be the next regional downstream O&G industrial hub,” it said.

Petronas' Rapid gets RM89bil investment, one-year delay
by john loh The Star 4 Apr 14;

PETALING JAYA: Petroliam Nasional Bhd (Petronas) has green-lit its much-awaited final investment decision (FID) for the Pengerang Integrated Complex (PIC) in south Johor with a commitment of US$27bil (RM88.56bil), but the project will start up a year later than expected in 2019.

The FID marks a "significant milestone" for PIC, of which the Refinery and Petrochemical Integrated Development (Rapid) is a key component, Petronas said in a statement yesterday.

Rapid, an anchor project of the Economic Transformation Programme, is estimated to cost about US$16bil (RM52.48bil) and its associated facilities, US$11bil (RM36.08bil).

But based on current progress, Petronas acknowledged that the refinery would only be commissioned by early 2019.

“The FID is a critical stage gate in our decision-making process. 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,” president and group CEO Tan Sri Shamsul Azhar Abbas said.

“This decision is in line with our commitment to capital discipline, and with the board’s approval we look forward to progressing the development of the project as planned.

“We will continue to work closely with the federal and Johor state governments to ensure the project’s smooth implementation.

“In a relatively condensed period of time, we have accomplished a lot of work in establishing an excellent base to move forward with confidence to implement our plans.”

The massive project, located at the southern most tip of the peninsula and just 10km from Singapore’s east coast, is understood to have been held up by land acquisition issues, with Petronas facing opposition from fishermen and local residents.

The party solely responsible for the relocation of villages and some 3,000 Chinese and Muslim graves is the state government.

Petronas would also have to procure a stable supply of raw water by building a new dam and 88km of pipelines.

The state-owned oil firm has twice delayed its FID for Rapid, Malaysia’s largest liquid-based green-field downstream development. Its start-up was originally scheduled for late-2016.

Still, the decision to go ahead means Petronas will not have to wait another decade to ride the next upcycle in the petrochemical industry.

According to Petronas, its partners in PIC will announce their respective FIDs in due course.

It had previously inked agreements with Germany’s Evonik Industries AG, Italy’s Versalis SpA, Japan’s Itochu Corp, and Thailand’s PTT Global Chemical PCL, although the latter said in February it was pulling out of Rapid.

French firm Technip SA has been appointed the front-end engineering and design contractor for the complex.

PIC is scheduled to commence construction upon the full hand-over of the project site to Petronas by the Johor state government.

“The project would further strengthen Petronas’ position as a key player in the Asian chemicals market, focusing on key growth areas of differentiated and specialty chemicals and capturing the growing automotive, pharmaceutical and consumer products sectors,” the group said.

Domestically, PIC is expected to contribute towards meeting the growing demands for petroleum products and Euro 4M and Euro 5 specification fuels.

Developed within a 6,242-acre site, PIC is to consist of a 300,000 barrels per day refinery and petrochemical complex with a combined capacity of producing 7.7 million tonnes per annum of various grades of products, including differentiated and specialty chemicals products such as synthetic rubbers and high-grade polymers.

The project will also see the development of a host of associated facilities such as a raw water supply facility, power co-generation plant, liquefied natural gas regasification terminal and other ancillary facilities.

At the peak of its construction, Petronas said PIC will employ a workforce of about 70,000 people with varying skills and disciplines. When operational, PIC will require over 4,000 employees.

PIC forms part of the Pengerang Integrated Petroleum Complex, which is envisioned as the next regional downstream oil and gas industrial hub.

Petronas Reaches Final Investment Decision For Pengerang Integrated Complex
Bernama 3 Apr 14;

KUALA LUMPUR, April 3 (Bernama) -- The Petronas Board of Directors has approved the Final Investment Decision (FID) for the development of the Pengerang Integrated Complex (PIC) in Johor.

The FID, approved today, marks a significant milestone in the progress of the proposed PIC, which comprises a world-scale Refinery and Petrochemical Integrated Development (RAPID) and other associated facilities.

RAPID is estimated to cost about US$16 billion (US$1=RM3.28) while the associated facilities will involve an investment of some US$11 billion.

"The FID is a critical stage gate in our decision-making process," Petronas President and Group Chief Executive Officer Tan Sri Shamsul Azhar Abbas said in a statement today.

Petronas, he said, 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.

"This decision is in line with our commitment to capital discipline, and with the Board's approval we look forward to progressing the development of the project as planned," he said.

Shamsul Azhar said Petronas would continue to work closely with the Federal and Johor state governments to ensure the project's smooth implementation.

"In a relatively condensed period of time, we have accomplished a lot of work in establishing an excellent base to move forward with confidence to implement our plans," he said.

Subsequent to Petronas' decision, the partners' respective FIDs will be announced in due course upon the approval of their respective boards.

The PIC is scheduled to commence construction upon the full hand-over of the project site to Petronas by the state Government.

Based on the current progress, the project is poised for its refinery start-up by early 2019.

The project will further strengthen Petronas' position as a key player in the Asian chemicals market, focusing on key growth areas of differentiated and specialty chemicals and capturing the growing automotive, pharmaceutical and consumer product sectors.

Domestically, the PIC will contribute towards meeting the growing demand for petroleum products and Euro 4M and Euro 5 specification fuels.

Developed within a 2,521.8-hectare site, the PIC will consist of a 300,000-barrels per day refinery and a petrochemical complex with a combined capacity of producing 7.7 million tonnes per annum of various grades of products including differentiated and specialty chemicals products such as synthetic rubbers and high-grade polymers.

The project will also see the development of a host of associated facilities namely raw water supply facility, power co-generation plant, liquefied natural gas regasification terminal and other ancillary facilities.

At the peak of its construction, the PIC project is expected to have a workforce of about 70,000 people with varying skills and disciplines.

In its operational stage, the PIC will require over 4,000 employees.

The PIC is part of the larger Pengerang Integrated Petroleum Complex (PIPC) proposed and promoted by the Johor state government.

With its strategic location along one of the world's busiest shipping lanes and its proximity to international trading hub, the PIPC is well positioned to be the next regional downstream oil and gas industrial hub.

-- BERNAMA

Petronas' PIC Project Seen As Vital For Country's Downstream Sector
Bernama 4 Apr 14;

KUALA LUMPUR, April 4 (Bernama) -- Petronas' Pengerang Integrated Complex (PIC) project in Johor is vital for the country's downstream sector, said analysts.

"It makes sense for the country to refine its own crude oil and produce higher value-added petrochemical products, to better manage our oil and gas resources, especially with the expected increase in production from the various upstream initiatives.

"Despite being the 29th largest crude oil producer in the world, we export and import almost the same amount of refined petroleum products," Hong Leong IB Research said in a statement on Friday.

With the PIC project, the research house said the country's total refining capacity would increase to 935,300 barrels per day (bpd), from the current 635,000 bpd, while petrochemical related products are expected to increase from 2.6 million metric tonnes per annum (MTA) to 6.5 MTA.

Meanwhile, Maybank IB Research said Petronas needs to diversify its downstream business to retain productive investments in Malaysia, as the subsidy burden has been partly lifted from Petronas' shoulders with the government's ongoing fiscal measures, which include subsidy rationalisation.

The PIC will comprise a world scale Refinery and Petrochemical Integrated Development (RAPID) and other associated facilities.

Maybank IB Research said the final investment decision by Petronas's board for PIC to go ahead, although the RAPID project has been scaled down to US$16 billion (US$1=RM3.28) from the earlier proposed US$20 billion, is crucial and key to kick-starting the major project.

"This mega project will have massive multiplier and spin-off effects, with the creation of a strategic petrochemical and refinery hub in Asia, to an oil trading hub, and potentially a new crude benchmark," said Maybank IB Research in a statement Friday.

The research houses are maintaining a positive stance on the oil and gas sector.

Hong Leong IB Research sees onshore fabricators/process equipment providers like KNM, Muhibbah, Eversendai, MMHE, Pantech and downstream players like Dialog, Petronas Chemicals and Petronas Gas with the potential to leverage on the RAPID project.

Maybank IB Research says Dialog is a prime beneficiary, adding Petronas Chemical could participate in the petrochemical operations and refineries.

"MPHB and IJML have large land exposure next to RAPID and will gain from the rise in commercial land values there," it said.

Stocks that are poised to benefit from the mega project are Dialog, WCT, IJM Corp and MPHB, with target prices of RM3.90, RM2.55, RM6.75 and RM2.42, respectively, it added.

-- BERNAMA

Johor State To Render Cooperation To Ensure Rapid's Success
Bernama 4 Apr 14;

BATU PAHAT, April 4 (Bernama) -- The Johor government will extend its full cooperation to ensure the success of the mammoth US$16 billion Pengerang Integrated Complex (PIC) project.

Menteri Besar Datuk Seri Mohamed Khaled Nordin said the state government would create a conducive environment and ensure adequate skilled work force for the region's oil and gas industry.

"Petronas has invested heavily in the project and I welcome the final investment decision (FIC)," he was commenting on the move reached yesterday by the Petronas board for the PIC project after opening the 'Road to MAHA' road show at Penggaram Square here today.

The road show is aimed at promoting the Malaysian Agriculture, Horticulture and Agrotourism Exhibition to be held for ten days beginning Nov 20 in Serdang.

"We are also in talks with Petronas to create business opportunities for the local community in order for them to benefit from the development," he said.

Mohd Khaled said the FIC marked an important milestone in the development of PIC that included the Refinery and Petrochemical Integrated Development (RAPID) project and other facilities.

It was reported yesterday that the PIC project would continue despite the RAPID project being scaled down to US$16 billion from US$20 billion estimated earlier while the development of other facilities would involve an investment of US$11 billion.

The PIC, sprawled over a 2,521.8 hectare site, will have a refinery and petrochemical complex with a capacity to process 300,000 barrels per day and a combined production capacity of 7.7 million tonnes per annum of various grades of products, including specialty chemicals and products as diverse as synthetic rubber and high-grade polymer.

The project's development will also see related facilities such as untreated water supply, power co-generation plant and other ancillary facilities.

At the peak of its construction, the project would have employed about 70,000 workers of diverse skills and disciplines.

Meanwhile, Mohamed Khaled said the state government would set up a petroleum academy, in collaboration with Prestariang Technology Sdn Bhd, to create skilled workers for the oil and gas industry.

-- BERNAMA

Green light for Rapid
KAMARUL YUNUS New Straits Times 3 Apr 14;

MAMMOTH PROJECT: Petronas’ US$16b development in Johor set for refinery start-up by early 2019

THE US$16 billion (RM53 billion) Refinery and Petrochemical Integrated Development (Rapid) in Pengerang, Johor, will proceed as planned, ending concerns that the mammoth project will be scrapped due to the withdrawal of several potential partners.

Petroliam Nasional Bhd (Petronas) said yesterday its board had approved the final investment decision (FID) for the development of the Pengerang Integrated Complex (PIC), which
includes Rapid and other associated facilities’ development.

“The FID marks a significant milestone in the progress of the proposed PIC, which comprises a world-scale Rapid and other associated facilities,” Petronas said in a statement.

Rapid is estimated to cost about US$16 billion, while the associated facilities will involve another US$11 billion in investments.

The national oil corportaion has signed heads of agreement with Italy’s Versalis, Japan’s Itochu and Thailand’s PTT Global Chemical to build specialty chemical plants within Rapid.

Germany’s Evonik has joined the project after BASF pulled out, citing differences in business strategies.

But there were also reports that Taiwan’s KuoKuang Petrochemical Technology and PTT Global Chemical had decided to pull out of the project.

Petronas president and group chief executive officer Tan Sri Shamsul Azhar Abbas said the FID is a critical stage gate in the group’s decision-making process.

“Petronas undertook a rigorous review of the project, including independent third-party assessment, to ensure it meets our criteria for long-term profitable and sustainable growth.

“This decision is in line with our commitment to capital discipline, and with the board’s approval, we look forward to progressing the development of the project as planned,” he said.

The partners’ respective FIDs will be announced in due course upon the approval of their respective boards, Shamsul said.

Construction of the PIC is scheduled to begin upon the full handing-over of the project site to Petronas by the Johor government.

“Based on the current progress, the project is set for its refinery start-up by early 2019,” Petronas said.

The project will further boost Petronas’ position as a key Asian chemical market player, focusing on key growth areas of differentiated and specialty chemicals, and capturing the growing automotive, pharmaceutical and consumer products sectors.

Domestically, the PIC will contribute towards meeting the growing demands for petroleum products and Euro 4M and Euro 5 specification fuels.

Developed within a 2,526ha site, PIC will consist of a 300,000-barrel-per-day refinery and a petrochemical complex with a combined yearly production capacity of 7.7 million tonnes of various grades of products.

The PIC is part of the larger Pengerang Integrated Petroleum Complex (PIPC) proposed and promoted by the Johor government.

With its strategic location along one of the world’s busiest shipping la-nes and its proximity to international trading hub, the PIPC is well-positioned to be the next regional downstream oil and gas industrial hub.

Pengerang Integrated Petroleum Complex (PIPC)
Malaysia Petroleum Resources Corporation website (as at 7 Apr 14)

The focus on oil and gas projects, arising from the Economic Transformation Programme, will create a more dynamic and progressive oil and gas industry in Malaysia. Malaysia companies will be able to partake with local and foreign investors to invest in new technologies, new products as well as create countless job opportunities as several of these petrochemical projects take off in the near future.

The Pengerang Integrated Petroleum Complex (PIPC) is one big step in creating value to the downstream oil and gas value chain in Johor. Sited in Pengerang, it is one of the largest pieces of investments in Pengerang district and located on a single plot measuring about 20,000 acres. The project will house oil refineries, naphtha crackers, petrochemical plants as well as a liquefied natural gas (LNG) import terminal and a regasification plant.

In PIPC, oil refining facilities will add value to imported crude oil via the Pengerang Independent Deepwater Petroleum Terminal (PIDPT). New high-value and high-demand products and by-products, such as polymers, pharmaceutical products and plastics, will be created from the refined feedstock. In creating these products, Malaysia’s petrochemical complexes will be able to generate greater value and investments from its oil and gas sector.

As of January 2013, two major catalytic projects have been committed within the PIPC area. The RM5 billion Pengerang Independent Deepwater Petroleum Terminal (PIDPT) is a joint-venture between DIALOG Group of Malaysia, Royal Vopak of Netherlands and Johor State Secretary Incorporated (SSI). Construction of Phase 1 of the project has already started and is scheduled for completion by Q1 2014 and Phase 2 land reclamation is in progress. The total storage capacity available at PIDPT is planned for five million cubic metres by the year 2020.

The second mega-project within PIPC is PETRONAS’ RM60 billion Refinery and Petrochemical Integrated Development (RAPID) Project. The RAPID project site preparation is in progress and is expected to be commissioned by 2016. RAPID will have a 300,000 bbl. per day refining capacity while additional petrochemical plants will generate value to petroleum products produced in RAPID.