Analysts: PIPC to enhance Malaysia’s energy security
KUCHING: Analysts believe Pengerang Integrated Petroleum Complex (PIPC) will enhance Malaysia's energy security, projecting that its revenue could potentially reach US$11.3 billion per annum (pa) when it reaches full operating capacity, sometime in 2022E.
According to the research arm of Maybank Investment Bank Bhd (Maybank IB Research), PIPC is a US$27 billion investment to develop Malaysia's largest petrochemical cluster and is expected to transform the country from an importer to a net exporter of refined petroleum products.
“This would be positive for sustaining its trade or currentaccount surpluses. The project is expected to commence commercial operations in November 2019,” Maybank IB Research said.
“PIPC will enhance Malaysia's energy security in three ways. Firstly, Regasification Terminal 2 (RGT2) will provide a second inlet to import liquefied natural gas ( LNG). This enhances the supply integrity of Peninsular Gas Utilisation (PGU).
“Secondly, Malaysia will be self-sufficient in crude-oil refining. This attribute is further enhanced by its long-term crude-oil supply contract with Saudi Aramco. Saudi Aramco is in control of the world's thirdlargest crude-oil reserves and is the biggest global crude-oil exporter.
“Thirdly, the country benefits from having a higher storage capacity of energy products such as LNG, crude oil and refined petroleum products.”
On revenue contributions, Maybank IB Research noted that it could potentially reach US$11.3 billion pa when it reaches full operating capacity, sometime in 2022E.
“Crude-oil refineries typically undergo five-year turnaround cycles with maintenance shutdown of four months. This explains why we forecast a drop in 2024 revenue.”
The research arm also forecasted net gross domestic product (GDP) contributions of RM8.5 billion pa when PIPC reaches full operating capacity.
It noted that this is after filtering out raw-material imports from revenue.
“Based on this, it equates to 2.7 per cent of Malaysia's manufacturing output of RM312 billion in 2018. The manufacturing sector made up 21.6 per cent of Malaysia's GDP in 2018 and has been growing at a 10-year compound annual growth rate (CAGR) of five per cent. PIPC is expected to boost its growth momentum.”
As for PIPC productivity, Maybank IB Research forecasted that it will be high at RM1.4 million per employee. The research arm assumed that PIPC will contribute RM8.5 billion to GDP and create 6,000 new jobs.
“This productivity is 17.1fold higher than the national average of RM83,056 in 2018. It is also 12.5-fold higher than the manufacturing sector's average productivity of RM113,519 in 2018.
“All else being equal, PIPC's productivity should boost the national average by 0.7 per cent.”