Malaysia's national oil company Petronas on Friday unveiled plans for an ambitious $20 billion oil refinery and petrochemicals complex in a southern state bordering Singapore as part of its energy processing expansion.
Petronas Chief Executive Shamsul Azhar Abbas said the project, which will be undertaken with foreign partners, could turn Johor state into an energy trading center and bolster Malaysia's long-term economic growth.
He said the project, which will be completed by late 2016, would not compete but rather complement Singapore, which is Asia's largest oil trading and storage center but lacks resources for further expansion. He said Petronas is no longer keen to just sell oil and gas in their raw forms but venturing into producing end products for export to Asia.
"We are no longer just going into (selling) commodities, which is a sunset industry," Shamsul said. "We are now moving into a major phase of expansion of the downstream business, especially to capture the opportunities in Asia's fast-growing oil and chemical markets,"
Sited on a 2,500-acre (1,000-hectare) site in Pengerang, Johor, the hub includes a refinery with a capacity to process 300,000 barrels of crude oil daily into gasoline, jet fuel and diesel. The petrochemical complex will produce 3.9 million tons a year of high-end specialty products for pharmaceuticals, electronics, plastic, automotive and other industries, Petronas said.
The project will raise Malaysia's refining capacity by nearly 50 percent to 935,300 barrels a day, closing the gap with Singapore which has a refining capacity of 1.3 million barrels daily.
Malaysia is the region's second largest oil producer after Indonesia but it lags behind economic rival Singapore, which has no energy resources of its own but has drawn oil majors to develop a thriving hydrocarbon trading business by importing crude oil for refining and re-export.
Shamsul said Petronas would decide by the end of the year whether to build a liquefied natural gas import and regasification terminal in Pengerang, its second in the country. A gas power plant will also be commissioned, he said but gave no details.
Prime Minister Najib Razak said the Johor hub, which is larger than the combined capacity of two existing Petronas refineries in the country, would lure foreign investment and fuel growth of new industries. He said it would create 4,000 jobs when completed.
"This project is indeed a bold undertaking by Petronas," he said at the ceremony. "I am hopeful that the spin-offs from this project will provide a further catalyst for industrial development,"
The Petronas project will be supported by Southeast Asia's first deepwater petroleum terminal in the area. The 5 billion ringgit ($1.66 billion) project will have storage tanks and marine facilities that can accommodate very large crude carriers, officials said.
It will be developed by Malaysia's Dialog Group, with Johor government and Rotterdam-based Royal Vopak NV, the world's biggest chemical and oil storage company.