Mov­ing down­stream in oil and gas

The Star Malaysia - Star2 - - DAULAT TUANKU SULTAN JOHOR - By IZWAN IDRIS izwan@ thes­tar. com. my

JO­HOR’S trans­for­ma­tion into a down­stream hub in the oil and gas in­dus­try is gath­er­ing pace, cre­at­ing thou­sands of new jobs and fu­elling the state’s steady rise as a ma­jor eco­nomic pow­er­house in the coun­try.

This strate­gic di­ver­si­fi­ca­tion into refining and man­u­fac­tur­ing of higher- value prod­ucts in the petro­chem­i­cals sec­tor is aimed at max­imis­ing Malaysia’s petrodol­lar in­come.

Bil­lions of ring­git are also be­ing in­vested into a deep­wa­ter ter­mi­nal pro­ject and tank farms on Jo­hor’s south­ern coast­line. The idea drew in­spi­ra­tion from the suc­cess of Hol­land’s Am­s­ter­dam- Rot­ter­damAn­twerp trad­ing cen­tres. The mas­sive in­vest­ment by the pub­lic and pri­vate sec­tors also serves as a cat­a­lyst to the eco­nomic de­vel­op­ment not only in the state, but also the coun­try as well.

In Pengerang, build­ing and con­struc­tion work at Petro­liam Na­sional Bhd’s ( Petronas) mas­sive re­fin­ery and petro­chem­i­cal in­te­grated de­vel­op­ment ( Rapid) com­plex is mov­ing along with a tar­geted com­ple­tion date in 2019.

Ex­pected to cost around RM60­bil when it was an­nounced in 2011, the Rapid pro­ject is the cor­ner­stone of a de­vel­op­ment to ac­cel­er­ate Jo­hor’s trans­for­ma­tion into a global oil and gas down­stream cen­tre.

To date, it is the big­gest in­vest­ment in the coun­try’s oil and gas down­stream busi­ness and will fea­ture an in­te­grated re­fin­ery and petro­chem­i­cal fa­cil­i­ties with other sup­port­ing ser­vices at a sin­gle site.

It is one of the two cat­alytic projects un­der the larger Pengerang In­te­grated Pe­tro­leum Com­plex ( PIPC), which cov­ers an area of 20,000 acres at the south­east tip of Jo­hor.

Pengerang is the nat­u­ral choice given its strate­gic lo­ca­tion near to the in­ter­na­tional sea lanes. It is a nat­u­rally shel­tered deep­wa­ter har­bour, hence mak­ing its hin­ter­land an ideal lo­ca­tion to serve as an oil, gas and petro­chem­i­cal hub.

Dia­log Bhd un­der­took the task of de­vel­op­ing the deep­wa­ter ter­mi­nal and wharf, which is the other key com­po­nent of PIPC. The Pengerang Deep­wa­ter Ter­mi­nal pro­ject started op­er­a­tions on April 2014.

The deep­wa­ter port, de­vel­oped by Dia­log to­gether with its part­ners Hol­land- based Royal Vopak and the Jo­hor State Govern­ment, is able to ac­com­mo­date very large crude car­ri­ers ( VLCCs) the size of four foot­ball pitches. The ter­mi­nal also in­cludes stor­age tank fa­cil­i­ties.

Ex­pan­sion at the Pengerang Deep­wa­ter Ter­mi­nal is on- go­ing, with phase two of the pro­ject in­volv­ing the de­vel­op­ment of fa­cil­i­ties re­quired for the han­dling, stor­age and dis­tri­bu­tion of the crude oil, pe­tro­leum, chem­i­cal and petro­chem­i­cal feed­stock prod­ucts to and from the Rapid com­plex.

A third phase of ex­pan­sion will see the de­vel­op­ment of liq­ue­fied nat­u­ral gas ( LNG) re­gasi­fi­ca­tion plant and stor­age fa­cil­i­ties.

The PIPC, when fully built, will boast stor­age, blend­ing and dis­tri­bu­tion ca­pac­ity to­talling five mil­lion cu­bic me­tres.

Ac­cord­ing to the Jo­hor Pe­tro­leum De­vel­op­ment Corp ( JPDC), the state is set to have a to­tal of 10 mil­lion cu­bic me­tres of oil and gas stor­age by 2020.

Aside from the Pengerang, two other strate­gic lo­ca­tions had been iden­ti­fied for the de­vel­op­ment of oil and gas stor­age fa­cil­i­ties.

The Tan­jung Langsat site, lo­cated at the ex­ist­ing port fa­cil­ity man­aged by Jo­hor Corp, will have a to­tal of two mil­lion cu­bic me­tres of stor­age ca­pac­ity. An­other three mil­lion cu­bic me­tres of stor­age fa­cil­i­ties is un­der­way at Tan­jung Bin, lo­cated at the south- western shore of Jo­hor.

The Tan­jung Bin petro­chem­i­cal and mar­itime in­dus­trial cen­tre, man­aged by MMC Corp Bhd’s unit Sea­port World­wide Sdn Bhd, cov­ers an area of 2,255 acres.

The main ac­tiv­i­ties at Tan­jung Bin will be fo­cused stor­age, blend­ing and tran­sit of pe­tro­leum prod­ucts. The growth of the oil and gas down­stream ac­tiv­i­ties in Jo­hor is still in its in­fancy com­pared with neigh­bour­ing Sin­ga­pore.

The two lacks nat­u­ral hy­dro­car­bon re­sources, but pos­sess sim­i­lar strate­gic ad­van­tages, thanks to their lo­ca­tion along the busy ship­ping routes and prox­im­ity to de­mand zones in Asia.

While Sin­ga­pore is al­ready an es­tab­lished player in the down­stream busi­ness – it is the world’s largest bunkering fuel desti­na­tion and boasts a ready ecosys­tem with ma­ture fi­nance, in­sur­ance and ar­bi­tra­tion ca­pac­i­ties – Jo­hor can draw on its own com­pet­i­tive ad­van­tages such as hav­ing a lot more land for fu­ture ex­pan­sion.

The oil and gas in­dus­try also has a long his­tory in Jo­hor. While the new projects in Pengerang fo­cuses on oil and gas down­stream ac­tiv­i­ties, other neigh­bour­ing coastal ar­eas such as Pasir Gu­dang and Teluk Ra­mu­nia are al­ready es­tab­lished lo­ca­tions in the up­stream side of the in­dus­try, spe­cial­is­ing in fab­ri­ca­tion of off­shore struc­tures.

The fo­cus to de­velop Malaysia Malaysia’s s down­stream ca­pa­bil­i­ties comes with chal­lenges, es­pe­cially in the cur­rent mar­ket cli­mate with the price of crude oil down sharply from where it was two years ago.

JPDC’s chief ex­ec­u­tive of­fi­cer Mohd Yazid Ja’afar ad­mit­ted in Jan­uary the task of get­ting new in­vestors to come in to Pengerang has be­come in­creas­ingly dif­fi­cult as global play­ers cut back on their in­vest­ment plans.

With equal rep­re­sen­ta­tives from the state and fed­eral gov­ern­ments, JPDC’s main role is to co­or­di­nate the de­vel­op­ment of PIPC.

The PIPC was launched as part of the Govern­ment’s eco­nomic trans­for­ma­tion pro­gramme. The goal for PIPC is to cre­ate high- pay­ing jobs and be both sus­tain­able and an in­clu­sive mo­tor of growth for Jo­hor and Malaysia as a whole.

One of the cru­cial roles for the Govern­ment is to put in in­fra­struc­ture and util­i­ties in Pengerang and con­nect­ing ar­eas to cater for the fu­ture ex­pan­sion needs once PIPC is in place.

Th­ese in­clude con­struc­tion of new roads, in­stalling a com­pre­hen­sive net­work of power, telecom­mu­ni­ca­tions and wa­ter sup­plies, up­grad­ing roads to high­ways to fa­cil­i­tate move­ments of goods and ser­vices and a cen­tralised man­age­ment of in­dus­trial waste prod­ucts from the com­plex.

With bud­gets in the bil­lions of ring­git, time­lines span­ning years and life­cy­cles ex­tend­ing over decades, oil and gas projects present unique chal­lenges. But the po­ten­tial eco­nomic wins are huge and Jo­hor is al­ready reap­ing the ben­e­fits.

Left: Oil and gas sec­tor is one of the nine pro­moted eco­nomic clus­ters in Iskan­dar Malaysia and will play a sig­nif­i­cant role in cre­at­ing eco­nomic spillover. Below: A very large crude car­rier dock­ing at the Pengerang eep­wa­ter Ter­mi­nal in Jo­hor.

Oil and gas berthing fa­cil­i­ties at Jo­hor Port in Pasir Gu­dang, Jo­hor.

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