Daily Management Review

Saudi Aramco to invest $ 7 billion in a refinery in Malaysia


Saudi Arabia’s state oil company Saudi Aramco plans to invest $ 7 billion in construction of a refinery and petrochemical complex in the southern Malaysian state of Johor. This was stated by Prime Minister of Malaysia Najib Tun Razak.

Kyle Pearce via flickr
Kyle Pearce via flickr
According to him, this decision was made on Monday after a discussion between managers of Saudi Aramco and Malaysian state oil and gas company Petroliam Nasional Bhd (Petronas), which acts as sponsor of a project called RAPID (Refinery and Petrochemicals Integrated Development), according to Reuters.

Statement of the Malaysian Prime Minister suggests radical changes in RAPID’s fate. Previously in January sources familiar with the matter supposed that Aramco planned to withdraw from the project in partnership with Petronas. Petronas then expressed willingness to continue working on the project, despite Aramco’s refusal.

"This is a major investment, and more details will be presented tomorrow," - said Razak at a press conference after a business breakfast with King of Saudi Arabia Salman and his entourage.

"I just want to confirm that the agreement is reached and King Salman is satisfied that the deal will be signed tomorrow," - Prime Minister added.

Leaders of Petronas and Saudi Aramco are expected to sign the agreement tomorrow.

RAPID complex, located in the town of Pengerang, Johor State, will be opened in the first quarter of 2019. It includes a refinery with capacity of 300 th. barrels per day, as well as petrochemical plants with a production capacity of 7.7 million metric tons per year. The complex will operate alongside the existing oil storage in Pengerang.

The Malaysian company has been hit hard by falling oil prices in the past few years. Petronas has been forced to cut jobs, investment projects, and, in addition, received less profit, much of which goes to the state treasury. In this regard, development of RAPID complex is very important not only in business, but also in political sense, the more so Prime Minister of Malaysia Najib Tun Razak "is mired in a corruption scandal" involving state fund 1MDB. Now, however, Petronas needs a strategic investor to implement their plans, and it looks like Aramco could play this role very well.

Expert and Senior Director for Energy Asia-Pacific consulting firm Frost and Sullivan Subbu Bettadapura said: "Malaysia will definitely try to raise funds in Pengerang, since so much depends on the project. All powers, both political and industrial, will try to make it real."

According to Prime Minister of the country, project RAPID will create new jobs and will increase level of life of citizens and develop the country's economy. As mentioned above, this project is very important for Najib Razak from a political point of view, so it was planned that the project’s development should be clear of all obstacles at least until national elections in 2018.

source: reuters.com

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