Malaysia’s state-owned oil and gas company Petronas is on track to get its US$27bil refining and petrochemical complex in the south of the country up and running in 2019, the head of the group’s downstream operations.
Petronas has earmarked heavy spending cuts to contend with low oil prices that have sent profit tumbling, but the company remains committed to the Refinery and Petrochemical Integrated Development (Rapid) project it aims to turn into a regional oil and gas hub by 2035.
“By the end of the year we should have completed more than 50% of the complex and we’re on track to start operations in the first quarter of 2019,” Md Arif Mahmood, Petronas downstream CEO and group executive vice-president, told Reuters
The project, launched in 2012 at Pengerang in the southern state of Johor, will consist of a 300,000 barrel per day refinery and petrochemical complex with combined annual chemical output capacity of 7.7 million tonnes.
Other facilities include a liquefied natural gas (LNG) regasification terminal.
“There are four billion people in southern Asia and future growth will be there as the number of middle-class income makers grows,” Arif said.
Like other energy companies, Petronas has cut costs, laid off workers and deferred investments to offset the slide in crude prices.
It has earmarked more than 10 billion euros (US$11.2bil) of capital expenditure cuts over the next three to four years and is looking to maximise other revenue streams outside upstream exploration.
“With the new norm for crude at US$40 to US$50 a barrel, downstream has become a critical component, it flies the flag of the company,” Arif said.
In Italy to attend the Formula 1 Grand Prix at Monza (Petronas is sponsor of the Mercedes F1 team), Mahmood said that the company’s growth in Europe would be focused on expansion of its lubricants business.
“We have an aggressive plan to grow in Germany, the UK, Ireland and Italy,” he said.
Europe is one of the company’s main lubricant markets, generating 28% of the group’s total volumes.
Italy is the biggest market, accounting for 48% of European sales.
In chemicals, Mahmood said the group would maximise benefits from its partnership with Germany’s BASF, though a planned joint venture in synthetic rubber with Italian oil major Eni’s Versalis has been abandoned.
“We’ve both decided not to go ahead because of market conditions,” Arif said.
Besides the Rapid project, Petronas has ambitious plans in LNG and Arif said it hoped to gain long-awaited environmental clearance for a US$35bil LNG export terminal in western Canada by the end of the year.
Petronas has been waiting more than three years for a permit to start building the Pacific NorthWest terminal and some analysts have said that LNG oversupply and lower oil and gas prices now threaten to make the project unattractive.
“We are committed at the moment, but first we need to see what the conditions of approval are,” Mahmood said.
The company, which is one of the world’s largest LNG producers, is also on track with construction of a US$12bil offshore LNG plant that it touts as the world’s first floating liquefaction facility.
“You’ll see production at the end this year or early next,” Arif said, adding that commissioning is also under way for a ninth production line at the group’s Bintulu LNG complex in Malaysia.