Pengerang petrochem project struggles to attract the 'big guns'

KUALA LUMPUR: The completion of the Pengerang Integrated Petroleum Complex (PIPC) is likely to be delayed as Johor Petroleum Development Corp (JPDC) struggles to attract new big investors at a time when oil majors in the upstream segment are tightening their belts.
JPDC CEO Mohd Yazid Ja'afar (pix) said Phase 1 of PIPC is on track but future phases may see a slight delay. The master plan for the 20,000-acre project runs until 2035.
JPDC, the federal government agency that oversees the development of PIPC, has been facing difficulties in securing new investors.
"We couldn't get another Petronas (Petroliam Nasional Bhd) to come in. To ask another Petronas to come in, to set up and invest over RM100 billion, that is a bit tough in the current climate," Mohd Yazid told reporters at the MIDF Luncheon Talk titled "A Session with Pemandu on Infrastructure" yesterday.
"We do have difficulty in attracting new investors to come in. Obviously, a lot of these integrated players now they are looking at their books, thinking 'Can we survive? Can we ride out the storm?'
"So they are holding back their investment decisions. That's quite natural. That's the effect we are seeing on the ground at the moment. A lot slower investment will come in because, mind you, we are talking about massive investments. They will have to go through so many stages before they can come to the final decision on whether to invest or not. That is slowing down," he added.
On the masterplan for PIPC, Mohd Yazid said having been drafted back in 2010, there is now a need to review it to take into account the current market.
"For the whole area, we have a master plan until 2035. We finalised and drafted the masterplan back in 2010 when everything was hunky dory. Every five years the masterplan will need to be reviewed and we plan to do that this year. That will take into account the current scenario, what's going on now," he said.
"We plan to do that (review) this year and it will be finalised next year. We think there is a high likelihood that the end game, the timeline, will probably be stretched slightly longer than 2035," he added.
Mohd Yazid said the possible delay is due to the current economic climate and low oil prices as companies take a longer time to evaluate their investments because of restricted funds.
"It will take a lot longer for them to choose which project is worthwhile for them to do."
However, Mohd Yazid stressed that projects that have been committed are progressing as scheduled and there has been no sign or talk of delays. They include Petronas' Refinery and Petrochemicals Integrated Development (Rapid), which is in Phase 1 of PIPC. Rapid is on track to kick off in 2019 despite the capital expenditure cut announced by Petronas.
On the flip side, refiners are taking advantage of the rate at which crude prices are declining, which is much faster than the rate at which product prices are declining.
"So there is, if you like, a spread which refiners are taking advantage of. Downstream players are making huge amounts of money. These are best times for them but, within their own areas, there are limits. There are various opportunities, not everyone is enjoying the same benefit.

"Those with simpler refinery set-ups are enjoying a lot more benefits from this as opposed to those with a lot more complex refinery set ups. They can pick and choose the kind of crude they can process, because it is so cheap now. They can choose to suit their simple refinery set up," said Mohd Yazid.