Malaysia's Prime Minister Najib Razak said on Monday Saudi Arabia's state oil company Saudi Aramco will invest US$7 billion into an oil refinery and petrochemical project in Malaysia's southern state of Johor.
Najib said the decision was made before noon on Monday after discussions between top executives from Saudi Aramco and Malaysia's state-owned energy company Petroliam Nasional Bhd (Petronas), the sponsor of the $27 billion Refinery and Petrochemical Integrated Development (RAPID) project, according to Reuters.
"This is a significant investment and more details will be announced tomorrow," Reuters quoted Najib to have said at a brief news conference after hosting a state luncheon for Saudi Arabia's King Salman and his entourage.
"I just want to confirm that the agreement has been reached and King Salman is satisfied that the deal will be signed tomorrow," Najib said.
The RAPID project, located at Pengerang in Johor, is expected to begin operations in the first quarter of 2019. RAPID will contain a 300,000-barrel-per-day oil refinery and a petrochemical complex with a production capacity of 7.7 million metric tonnes. The complex will be alongside an existing oil storage site at Pengerang.
Last year, Petronas sought proposals for a $7.2 billion loan for the project, with separate guarantees from the company and Aramco, Thomson Reuters IFR reported in June.
Upon the completion of the transaction, subject to regulatory approvals and the completion of other associated agreements, both partners will hold equal ownership in selected ventures and assets of the RAPID project within the Pengerang Integrated Complex, Saudi Aramco said in a statement.
"Together with Malaysia, the Southeast Asia region offers tremendous growth opportunities and today’s agreement further strengthens Saudi Aramco’s position as the leading supplier of petroleum feedstock to Malaysia and Southeast Asia, and with RAPID’s strategic location in a prolific hub, it would also serve to enhance energy security in the Asia-Pacific region,” Saudi Aramco’s president and CEO Nasser said in a statement.
Under the partnership, Saudi Aramco will meet most of the crude feedstock requirements of the refinery, with natural gas, power and other utilities supplied by PETRONAS.
PETRONAS’ president and group CEO Datuk Wan Zulkiflee Wan Ariffin said, “The PIC is one of the largest industrial developments in the region as well as PETRONAS’ largest downstream investment on a single site to date.”
RAPID’s refinery will produce a host of refined petroleum products, including gasoline and diesel which meets Euro 5 fuel specifications; as well as feedstock for its integrated petrochemical complex producing 3.5 million tons per annum of products.
Situated 400 kilometers south of Malaysia’s capital Kuala Lumpur, the PIC development is almost 60 percent complete and is on track for refinery start-up in 2019, the statement said.
Apart from RAPID, which comprises the refinery, cracker and the downstream petrochemical complex, the PIC, located on a 6,242-acre site, also includes the development of associated facilities such as a co-generation plant, an LNG re-gasification terminal, a raw water supply project, a deep water terminal, as well as centralized and shared utility facilities.
The PIC forms part of Malaysia’s ambitious 22,000-acre Pengerang Integrated Petroleum Complex (PIPC) under the Government’s Economic Transformation Program to establish new engines of growth and push the nation into a new frontier of technology and economic development in the oil and gas downstream sector.