Sunday, May 15, 2011

KL building massive oil-gas hub in Johor

$24b project on the coast in Pengerang is seen as direct threat to Singapore
Leslie Lopez
Straits Times 14 May 11;

KUALA LUMPUR: Malaysia has unveiled ambitious plans to establish a major oil-and-gas hub in the eastern corridor of the Johor coast, posing a direct threat to Singapore's position as the region's premier energy trading and refining centre.

National oil corporation Petroliam Nasional, or Petronas, said yesterday that it will spend RM60 billion (S$24 billion) to build an integrated downstream oil and gas complex in Pengerang.

The Refinery and Petrochemicals Integrated Development, or Rapid, will feature a crude oil refinery with a throughput capacity of roughly 300,000 barrels per day (bpd), a naphtha cracker and several petrochemical complexes.

The project, which represents the single largest undertaking by Petronas to date, is part of a major push by the administration of Prime Minister Najib Razak to draw much-needed foreign investment and create new sources of growth for the Malaysian economy.

Datuk Seri Najib, who officiated at the unveiling of Malaysia's latest oil and gas undertaking, described it as a bold push by Petronas to seize opportunities presented by Asia's robust energy and chemical markets.

Malaysia also took pains to dispel the widely held view that the project represented Kuala Lumpur's latest effort in the decades-old economic rivalry with Singapore.

Petronas chief executive Shamsul Azhar Abbas noted that Rapid would complement Singapore's existing petrochemical industry. 'Let's not view Singapore as a competitor,' he told reporters.

But industry executives and private economists insisted otherwise.

'Malaysia could have easily expanded its current facilities. Rapid is clearly designed to compete,' said a senior executive of a foreign oil services company in Kuala Lumpur, referring to Petronas' existing oil refinery and petrochemical facilities in the coastal regions of Terengganu and Pahang.

Over the years, Kuala Lumpur has moved to develop its airports, port services and bunkering sector to claw back business from Singapore. But those efforts have yet to bear fruit.

'The emphasis here is putting in the hardware by building and ignoring the software. We keep losing out because Malaysia lacks the ability to deliver world-class services,' lamented a chief executive of a large infrastructure group in Malaysia who asked not to be named.

Rapid, which has earmarked just over 1,000ha of coastal land for development, will be different, argue proponents of Petronas' new initiative.

Malaysian planners note that Singapore is hitting the limits of its ability to expand storage capacity. To meet growing demand, Singapore has been forced to pursue novel projects, such as carving tunnels and caverns beneath the seabed west of the island to create storage space for oil.

Singapore has an export refining capacity of 1.3 million bpd, compared with Malaysia's 560,000 bpd capacity.

Malaysian government officials insist that Asia's growing appetite for crude oil will create room for another player.

One major boost has been the March disasters in Japan.

The earthquake and tsunami, which damaged power facilities and triggered a nuclear crisis, have touched off a scramble among key Asian economies to find alternative locations for power plants and manufacturing facilities to ensure security of supply in the event of a major natural disaster.

Japan, which has pledged to close several older nuclear plants, will need to turn to alternative power sources, such as liquefied natural gas. So will South Korea and Taiwan, which will also need to relocate critical industries, such as petrochemicals and oil refining, to safer locations.

'Rapid has the land and infrastructure to cater for this relocation,' said a senior government official involved in the planning of the Petronas project.

The Rapid development will also feature a RM5 billion deepwater petroleum terminal, which is being built by a consortium led by Dailog, a publicly listed oil and gas services company controlled by low-profile businessman Ngau Boon Keat. The first phase of the project is expected to come onstream in 2016.

With increased refining and chemical processing in Malaysia, Kuala Lumpur is hoping to take a slice of Singapore's oil and derivative trading over the next decade, government officials said.

Petronas to invest RM60b in Johor complex
It will be Malaysia's largest single downstream oil investment; project to complement rather than compete with Singapore, says Petronas
S Jayasankaran Business Times 14 May 11;

PRIME Minister Najib Razak yesterday announced that national oil company Petronas will invest RM60 billion (S$24.9 billion) to develop the Refinery and Petrochemical Integrated Development (Rapid) complex in Pengerang, Johor.

According to Petronas, it is being positioned to 'complement', rather than to compete, with Singapore.

The single largest downstream oil investment in the country, Rapid will comprise a crude oil refinery capable of producing 300,000 barrels per day; a naphtha cracker able to produce 3 million tonnes of ethylene, propylene and butane-to-pentane olefines; and a petrochemicals development, together with an unspecified foreign partner, which will produce three million tonnes of highly specialised petrochemical products a year.

'I am told that Rapid's oil refining capacity is greater than the combined capacities of Petronas' existing refineries in Malacca and Kerteh,' a smiling Mr Najib told guests at the project's launch. 'Its petrochemicals development is also expected to exceed the combined capacities of the Gebeng Integrated Petrochemical Complexes and Kerteh.'

It will also provide some 20,000 jobs during its construction phase and up to 4,000 jobs to highly-skilled oil and gas workers upon its completion in 2016.

'I am confident this landmark undertaking by Petronas will prove to be yet another significant milestone not only for the company's corporate history but also for Malaysia's industrial development,' Mr Najib said.

The premier added that the oil company was also reassessing the feasibility of a liquefied natural gas (LNG) receiving and re-gasification terminal in the area to help complement the energy needs of the project.

The development will give Mr Najib's Economic Transformation Programme an unexpected boost as it hadn't been factored in originally as part of the country's multibillion ringgit investment transfusion to propel it into the high income leagues. 'This wasn't part of the original ETP,' Petronas chief executive Shamsul Azhar Abbas told reporters at a media briefing later. 'This is a bonus.'

But given the massive resources required by Rapid, Petronas's ability to pay high dividends to the government could be sorely tested. Last year, the oil firm contributed over 35 per cent of government revenues.

Even so, the successful rollout of Rapid could witness a surge in foreign direct investment (FDI) as ancillary industries - the life sciences, pharmaceuticals, agriculture, etc - that rely on the project's by-products set up shop around the development. Indeed, Mr Najib described the project as a 'major trigger' for FDI.

Meanwhile, Ghani Othman, the chief minister of Johor, told reporters that there was no shortage of land in the area available for interested foreign parties. Rapid itself requires 1,012 hectares while a RM5 billion oil terminal project seven kilometres away leased 809 hectares from the state government yesterday.

Petronas' Mr Shamusl said that Rapid would 'complement' Singapore's petrochemicals business. 'Let's not view Singapore as a competitor,' he said. 'There are opportunities where we can do business integration because petrochemicals are not like any other product. Once you start cracking the naphtha, you get ... a lot of flows of tail-end products which will need to find a home.'

He said Petronas would not only seek 'full business integration' with Singapore but also the company's other petrochemical facilities in Malaysia. On foreign interest, Mr Shamsul revealed that foreign parties from 'earthquake-prone' countries who were reluctant to expand further in their home countries have already shown 'a lot' of interest. 'They're having problems in terms of expansion ... so what they have to do right now is move their expanded capacity out of the country into this particular region,' he said.

He stressed that the foreign partners in Rapid would be 'high-end companies' involved in specialty products that may also set up their own facilities in the region to help lower production costs.

RM60bil Petronas project will fuel massive spin-offs, says PM
Florence A. Samy The Star 14 May 11;

KUALA LUMPUR: Petronas will invest in a major RM60bil integrated refinery and petrochemical complex in Pengerang, Johor, touted to be its largest.

To be known as the Refinery and Petrochemicals Integrated Development (Rapid) project, it is is expected to be commissioned by the end of 2016, as part of the national oil company's efforts to expand its downstream production.

Prime Minister Datuk Seri Najib Tun Razak confirmed this, following a StarBiz breaking news story on Wednesday.

The mammoth project is expected to create at least 20,000 jobs during the construction phase and 4,000 potential jobs for highly-skilled workers.

This does not include the many spin-offs in related sectors, Najib said when announcing the project at the Petronas headquarters here yesterday.

"It is truly a remarkable initiative and a significant landmark for Malaysia. The project presents Malaysia with a major vehicle to attract foreign direct investments, bolster private investment and expand the country's access to world-class technologies.

"It will also provide avenues for a new generation of technical professionals to develop their skills and capabilities," he said, adding that the Government would provide its full support and assistance.

The Rapid project, Najib said, would consist of three main components:

> A crude oil refinery with a capacity of about 300,000 barrels per day, larger than the combined capacities of its refineries in Malacca and Kerteh.

> A naphtha cracker with the ability to produce three million tonnes of ethylene, propylene as well as C4 and C5 olefins; and

> A joint petrochemical development with a combined production capacity of three million tonnes per year, more than the combined production capacities of its integrated complexes in Kerteh and Gebeng, Pahang.

Najib, who is also Finance Minister, said although the Rapid project was not part of the entry point projects under the Economic Transformation Programme, it was still in line with plans to turn Malaysia into a leading petroleum industry hub in the region.

The area, Najib said, was chosen because of its large land acreage, strategic location near major international shipping lanes, deepwater port facilities and proximity to regional demand centres.

Malaysian oil giant to build $16b complex in Johor
Asia News NetworkBy Risen Jayaseelan and Jeeva Arulampalam in Petaling Jaya The Star/ANN Yahoo News 11 May 11;

Petaling Jaya (The Star/ANN) - Malaysia's state oil giant, Petroliam Nasional Bhd (Petronas), will announce on Friday plans to invest around 50bil ringgit (US$16.7bil) in an integrated downstream oil and gas complex in Pengerang, Johor, reliable sources said.

Dubbed Rapid or Refinery And Petrochemical Integrated Development, the project is aimed at building something "larger than Kertih" and will eventually include multinational oil and gas companies as joint-venture partners.

The integrated development will not only include oil refining and petrochemical activities, but include a gas power plant and other "supportive industries" said sources.

Rapid is a project identified in the Economic Transformation Programme (ETP), which is led by the Performance Management & Delivery Unit (Pemandu).

One of the reasons why Pengerang was chosen is because its waters can reach depths of more than 20m, which is what is needed for very large crude carriers (VLCC) and ultra large crude carriers.

The Johor government will be a joint-venture partner of the project and will provide the land.

Sources indicate that Petronas' Rapid project complements plans for the 5bil ringgit independent deepwater petroleum terminal in Pengerang, which is to be the first deepwater terminal in South-East Asia.

The terminal is a tankage facility for handling, storing, blending and distribution of crude oils and petroleum products with marine facilities capable of handling VLCCs.

Part of the thinking behind Rapid was to replicate what Singapore has already done successfully, sources said. Singapore's oil refining businesses only started around 10 years ago.

Singapore has an export refining capacity of 1.3 million barrels per day, compared with Malaysia's 560,000 barrels per day, according to the ETP roadmap.

Singapore Refining Company Pte Ltd, which operates a refinery on Jurong Island, is capable of processing 290,000 barrels of crude oil per day.

Other major refineries in Singapore include ExxonMobil's refinery in Jurong that process about 605,000 barrels of crude per day and Shell's Pulau Bukom Refinery with some 500,000 barrels of crude oil per day.

Plans for Petronas to develop Johor's Pengerang into a sizeable force in the oil and gas (O&G) space are not new.

Last November, the Government said Petronas would play a major role in the development of Johor's south-east areas of Teluk Ramunia and Pengerang into a O&G hub in the region.

It was then said that the investments in the hub would come from Petronas and its international partners and the investments would bring major development into Johor's south-east areas and could turn Teluk Ramunia and Pengerang into a new Kertih.

Petronas chief executive officer Datuk Shamsul Azhar Abbas confirmed then that Petronas was talking with several international investors to invest in Teluk Ramunia and Pengerang.

Once a sleepy fishing village in Terengganu, Kertih is now a thriving township due to O&G related activities with Petronas as the main driver in the O&G sector there.

The Petronas Kertih Refinery is the national oil company's first oil refinery in Malaysia, and processes 49,000 barrels of Malaysian light, sweet crude oil per day.

In total, Petronas owns and operates four refineries (three in Malaysia and one in South Africa) with a total refining capacity of more than 448,000 barrels per day.

The Government had also said then that while the investments would come from Petronas and its partners, the Government was looking into allocating money for infrastructure developments in the areas.

Another aspect of the oil and gas thrust in the ETP (and which is linked to the Rapid project) is for Malaysia to venture into the lucrative area of oil trading. Singapore accounts for hundreds of billions of oil trading every year, an area of business that is virtually absent in Malaysia.

According to the ETP roadmap, Singapore, by 2007, had built a significant trading business worth more than 1 trillion ringgit in physical oil trade and 2 trillion ringgit in derivative trade.

Sources said the Government may consider providing additional incentives to attract oil trading firms to be located in Johor.

Monday, May 9, 2011

Tuas Power to decide this year on Phase 2 at Jurong Island

Substantial portion of Phase 1 output already committed to new customers
Ronnie Lim Business Times 10 May 11;

CHINA Huaneng-owned Tuas Power (TP) expects to decide 'sometime this year' on embarking on Phase 2 of its $2 billion clean coal/ biomass multi-utilities facility on Jurong Island, TP's president and chief executive Lim Kong Puay told BT yesterday.

This is because a 'substantial portion' of the steam and power output from Phase 1 of the Tuas Multi-Utilities Complex (TMUC) - currently under construction - has already been committed to new petrochemical customers there, he disclosed.

They include Germany's Lanxess and Taiwan's Dairen Chemicals, each of which is building mega $500 million to $700 million plants there, with TP currently talking to 'a few others', Mr Lim added.

The genco embarked on Phase 1 of TMUC - producing 200 tonnes of steam per hour and 100 megawatts of power - in late-2009, and expects to start supplying customers with utilities like steam from the second half of next year.

Both Lanxess, which is building a state-of-the-art $680 million synthetic rubber plant here, and Dairen, which is investing $500 million in three chemicals plants on the island, have targeted start-ups in the first quarter of 2013.

In total, TP is targeting its TMUC project to provide 'one-stop, third-party utility services to the wide-range needs of approximately 15 petrochemical customers in the surrounding area', the genco revealed in its latest tender, called last Friday, for an EPC contractor to provide the utilities piping connecting TMUC to its new customers.

TMUC is being developed concurrently on two sites about 2 km apart on Jurong Island, the tender showed.

The 14-hectare Site 1 at Tembusu Crescent/Avenue - where the main power and steam will be produced, and including a desalination plant - has sea frontage to allow feedstocks comprising low-ash, low-sulphur coal and tropical biomass, mainly palm kernel, to be shipped in from suppliers including in Indonesia.

Site 2, occupying 8.75 hectares at the island's Banyan sector, houses plants for demineralised water treatment, waste water treatment and high-grade industrial water.

Lanxess' contract with TP, for instance, covers the supply of high-grade industrial water and demineralised water, apart from steam.

TMUC has been designed to produce in total 160 MW of power and 1,000 tonnes per hour of steam, with its seawater reverse osmosis plant designed to supply 20 million gallons of water per day.

TP is Singapore's third largest genco with 2,670 MW of capacity at its main Tuas power station.

The company has been aggressively expanding beyond power generation to supplying multi-utilities to petrochemical and other industries, like Finland's Neste Oil which produces renewable bio-diesel at a nearby $1.2 billion Tuas plant.

The genco is also spending another $470 million to 'repower' the first of two older, steam plants at its Tuas station into a more efficient combined cycle gas turbine plant, making this its fifth CCGT.