Complex Numbers

The Malaysian petrochemicals industry has made strides in recent years, growing rapidly as a result of well-developed infrastructure and increased international partnerships involving major companies. To further improve the nation’s position in this sector, an industrial complex in Pengerang, Johor, was announced in 2014. The project, however, has hit rough waters due to a difficult global environment in recent years. Plummeting oil prices have led investors to curtail investment, throwing the future of some of the complex’s projects into question. Still, several projects are already underway, and the complex should become a cornerstone of the industrial sector within the next few years.

The Pengerang Integrated Petroleum Complex (PIC) was first planned in 2010, with Petronas Chemicals group as a primary investor. The original plan called for the industrial site to house facilities including oil refineries, petrochemical plants, and a liquefied natural gas import terminal over the 20,000 acres of land in Johor, with the long-term goal of becoming a regional storage and trading hub by 2035. Pengerang was chosen because of its strategic location at the southeastern top of peninsular Malaysia, which gives it easy access to major international shipping lanes. Its relatively sparse population meant that the environmental and social impact of the complex will be minimal, and the harbor’s deep waters mean that shipping can proceed without the costly construction of breakwaters.

Parts of the original plan have already secured investment and are in the process of construction, with completion expected by 2019. The first major project underway at the PIC is a MYR5 billion deep-water petroleum terminal. A joint venture between Malaysian DIALOG Group Bhd, Dutch Firm Royal Vopak, and the Johor state government, the project is expected to have a storage capacity of 5 million cubic meters by 2020. A second megaproject already underway is a MYR60 billion Refinery and Petrochemical Integrated Development (RAPID) Project. Originally approved in 2004, this refinery project is expected to employ 70,000 workers during construction and create 4,000 new jobs upon completion in 2019. The project will cover 2,000ha and produce gasoline and diesel capable of meeting European standards. It also is planned to supply feed stock for a petrochemical complex.

Petronas Chemicals announced in April 2016 that it had cancelled plans for a USD1.3 billion elastomer project that would have been part of the RAPID project, lowering capacity reduction by 0.35 million metric tons per year to save USD1.3 billion in investment costs. Still, the yearly production of the PIC is expected to be well over 3mmt/year. Two other key projects planned for the PIC are a co-generation plant (PCP) and a polypropylene (PP) plant. The PCP will supply power to the entire PIC by generating 1.22GW through its four co-generation units. This low-emission energy will contribute to the environmentally friendly nature of the complex. The PP plant is designed to create a wide variety of PP products, with a production capacity of 900,000tpa upon completion.

In an interview with TBY, Petronas Chemicals Group Managing Director & CEO Datuk Sazali Hamzah explained the company’s core mission in Malaysia. “Our strategy is to strengthen our basic petrochemicals slate while selectively diversifying into derivatives, specialty chemicals, and solutions“ He went on; “Despite the current low market environment for ammonia and urea, we anticipate that urea consumption in the long run will continue to grow in relation to the growing population, especially in Southeast Asia as well as Asia Pacific. By 2020, our petrochemicals projects under the PIC project will further add about 3.5 million to reach 16mtpa, providing a solid foundation to move toward derivatives and specialty chemicals.“ Johor will become a centerpiece of this plan, allowing Petronas to diversify and find new routes to profitability and success in the Malaysian industrial sector.