Saudi Aramco shelves joint venture with Petronas

PETALING JAYA: Saudi Aramco has shelved plans for a partnership with Malaysian state oil firm Petroliam Nasional Bhd (Petronas) in a US$27 billion (RM165 billion) refining and petrochemical project in the Southeast Asian country, industry sources familiar with the matter told Reuters yesterday.

Aramco had been in talks with Petronas about a joint venture in the Refinery and Petrochemical Integrated Development (Rapid) project in Johor.

Aramco and Petronas officials did not respond immediately to requests for comment.

“I believe the proposal was still in an initial discussion phase,” said Sadad al-Husseini a former senior executive at Saudi Aramco and now an energy consultant.

“In any case, considering the scale of the investment, China’s growing regional exports of refined products, Singapore’s existing refining capacity and the competition this project would have created to Aramco’s own JV refineries in Korea, China and Japan, its deferral was probably a very well considered and prudent Aramco management decision at this time.”

The Rapid project, launched in 2012 and expected to begin operations in the first quarter of 2019, is designed to have a 300,000-barrel-per-day oil refinery and a petrochemical complex with a production capacity of 7.7 million tonnes.

Petronas last year sought proposals for a RM32 billion loan for the project, with separate guarantees from the company and Aramco, Thomson Reuters IFR reported in June.

Aramco’s move to suspend plans for the Malaysian venture comes at a time when Petronas is struggling with the slump in oil prices.

In early 2016 Petronas said it would cut spending by up to RM50 billion over the next four years. It has also slashed the dividend it pays to the Malaysian government.

Petronas also has yet to make a final investment decision on a controversial US$27 billion liquefied natural gas project in Canada that has come criticism from aboriginal and environmental groups.