KUALA LUMPUR: Petroliam Nasional Bhd (Petronas) is in talks with several global oil majors including Shell and Exxon Mobil to develop petrochemical plants within its US$20bil refinery complex in Johor, two sources with direct knowledge of the matter said.
The national oil company was also talking to Japanese firms Itochu Corpand Mitsubishi Corp as well as to Dow Chemical Co – the largest US chemical maker – as it sought to tap surging Asian demand and diversify its earnings, the sources told Reuters.
Petronas is expected to make a decision on the partnerships by mid-2012, which signals it is quickly moving beyond the feasibility stage of the project.
“Petronas is getting a lot of interest for the joint-venture undertakings,” said one source who declined to be identified as the talks are ongoing.
“They have moved to the basic engineering and design stage and after this, the tendering process for building the complex will start,” the source added.
Petronas, Shell and Mitsubishi officials in Malaysia declined to comment. Itochu, Dow Chemical and Exxon Mobil were not immediately available to comment.
Petronas first unveiled the Refinery and Petrochemicals Integrated Development (RAPID) project in May and has said the complex would be commissioned by end-2016, which both sources said was on track.
The project is key to Petronas’ plan to join the likes of India’s Reliance Industries in grabbing a larger share in the US$395bil global market for specialty chemicals – high-value raw materials used in products from diapers to higher performance tyres and LCD televisions.
“In terms of markets for petrochemicals coming from RAPID, Petronas is aiming for Myanmar, Bangladesh and parts of the subcontinent,” said a second source. “The potential is there as these are huge markets or in the case of Myanmar, just opening up.”
The RAPID project will include a 300,000 barrel-per-day refinery that produces naphtha, gasoline, jet fuel, diesel and fuel oil.
The first source said the crude feedstock would come mostly from Petronas’ equity projects in Sudan, Chad and eventually Venezuela instead of Malaysia’s own higher quality and expensive crude, domestic production of which is slowing.
The crude feedstock from Petronas equity projects will also be channelled into the petrochemicals and polymer complex, including a three-million-tonne per year naphtha cracker and petrochemical derivatives facility focusing on synthetic rubber.
“Over one million tonnes will be for ethylene and propylene and the rest for high grade specialty chemicals,” said the first source.
“Synthetic rubber is a big thing. Nearly 90% of a tyre is made of synthetic rubber because natural rubber production is declining in Asia, so there is an opportunity for Petronas,” the source added.
The RAPID project gives Petronas’ downstream operations a better chance of staying afloat in times of economic downturns and poor margins as it allows Malaysia’s only Fortune 500 company to tap into its global feedstock sources, analysts say.
“From a Petronas perspective, there is vertical integration opportunity,” said Andrew Wong, lead analyst covering Petronas at Standard & Poor’s in Singapore.
“I think the expectation for a recovery in the petrochemical sector in 2011 did not quite happen due to the external factors and there is concern whether the project will come onstream at a good point in time of the global economic cycle,” he added. — Reuters
http://biz.thestar.com.my/news/story.asp?file=/2011/12/24/business/10156177&sec=business
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