Exclusive: Petronas in Talks with Oil Majors for Petchem Tie-up

December 29, 2011 by · Leave a Comment 

By Niluksi Koswanage and Liau Y-Sing

2011-12-23T044657Z_1_BTRE7BM0DAB00_RTROPTP_3_BUSINESS-US-PETRONAS

Petronas advertising boards are seen near the grandstand ahead of the Malaysian F1 Grand Prix at the Sepang circuit outside Kuala Lumpur April 7, 2011.

REUTERS/Tim Chong

KUALA LUMPUR (Reuters) – Petronas is in talks with several global oil majors including Shell <RDSa.L> and Exxon Mobil <XOM.N> to develop petrochemical plants within its $20 billion refinery complex in southern Malaysia, two sources with direct knowledge of the matter said.

Malaysia’s national oil company is also talking to Japanese firms Itochu Corp <8001.T> and Mitsubishi Corp <8058.T> as well as to Dow Chemical Co <DOW.N> — the largest U.S. chemical maker — as it seeks to tap surging Asian demand and diversify its earnings, the sources told Reuters.

Petronas <PETR.UL> is expected to make a decision on the partnerships by mid-2012, which signals it is quickly moving beyond the feasibility stage of the project.

“Petronas is getting a lot of interest for the joint venture undertakings,” said one source who declined to be identified as the talks are ongoing.

“They have moved to the basic engineering and design stage and after this the tendering process for building the complex will start,” the source added.

Petronas, Shell and Mitsubishi officials in Malaysia declined to comment. Itochu, Dow Chemical and Exxon Mobil were not immediately available to comment.

Petronas first unveiled the Refinery and Petrochemicals Integrated Development (RAPID) project in May and has said the complex will be commissioned by end-2016, which both sources said was on track.

The $20 billion complex is to be built in southern Johor state which borders Singapore — the largest oil trading hub in Asia.

The project is key to Petronas’ plan to join the likes of India’s Reliance Industries <RELI.NS> in grabbing a larger share in the $395 billion global market for specialty chemicals — high value raw materials used in products from diapers to higher performance tires and LCD televisions.

“In terms of markets for petrochemicals coming from RAPID, Petronas is aiming for Myanmar, Bangladesh and parts of the subcontinent,” said a second source.

“The potential is there as these are huge markets or in the case of Myanmar, just opening up.”

RAPID REACH

The RAPID project will include a 300,000 barrel-per-day refinery that produces naphtha, gasoline, jet fuel, diesel and fuel oil. The first source said the crude feedstock would come mostly from Petronas’ equity projects in Sudan, Chad and eventually Venezuela instead of Malaysia’s own higher quality and expensive crude, domestic production of which is slowing.

The crude feedstock from Petronas equity projects will also be channeled into the petrochemicals and polymer complex, including a 3 million ton-per-year (tpy) naphtha cracker and petrochemical derivatives facility focusing on synthetic rubber.

“Over 1 million tons will be for ethylene and propylene and the rest for high grade specialty chemicals,” said the first source.

“Synthetic rubber is a big thing. Nearly 90 percent of a tire is made of synthetic rubber because natural rubber production is declining in Asia, so there is an opportunity for Petronas,” the source added.

STRUGGLE OR SURVIVE

The RAPID project gives Petronas’ downstream operations a better chance of staying afloat in times of economic downturns and poor margins as it allows Malaysia’s only Fortune 500 company to tap into its global feedstock sources, analysts say.

“From a Petronas perspective, there is vertical integration opportunity,” said Andrew Wong, lead analyst covering Petronas at Standard & Poor’s in Singapore.

“I think the expectation for a recovery in the petrochemical sector in 2011 did not quite happen due to the external factors and there is concern whether the project will come on-stream at a good point in time of the global economic cycle,” he added.

Industry players have said Malaysia and Petronas’ ramp-up of oil infrastructure in the southernmost tip of the country will create a “Greater Singapore” trading hub that allows the region to keep up with competitors like China.

Petronas is counting on interest from Japanese firms which are looking to relocate their plants or re-invest outside their home base after the March tsunami and earthquake triggered uncertainty over future energy supply, the second source said.

“The interest has particularly been strong from the usual Japanese players in the petrochemical market. This project has started at the right time,” the source added.

(Editing by Himani Sarkar)

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Iraq Cabinet Ratifies Four Major Oilfield Deals

January 9, 2010 by · Leave a Comment 

By Missy Ryan

2010-01-06T133509Z_2082907_GM1E6161NUB01_RTRMADP_3_IRAQ

Iraq’s President Jalal Talabani (Center L) and Defence Minister Abdel Qader Jassim (Center R) salute as they review troops during the Iraqi Army Day’s 89th anniversary celebration, in Baghdad January 6, 2010.

REUTERS/Stringer

BAGHDAD, Jan 5 (Reuters) – Iraq’s cabinet has ratified contracts with foreign firms to develop four oilfields, pushing Iraq a step closer toward finalising deals that may make it a leading world oil producer, the government said on Tuesday.

“The cabinet has ratified four oilfields: Majnoon, Gharaf, and in Nineveh province Qayara and al-Najmah,” government spokesman Ali al-Dabbagh said.

Last month, the Iraqi Oil Ministry initialled service contracts with seven foreign consortia to develop fields including supergiant Majnoon, which was awarded to Royal Dutch Shell and Malaysia’s Petronas in a December energy auction.

The firms, part of a long-awaited wave of foreign investment in Iraq’s promising oil sector, must now sign final deals before they can begin work.

The deals represent a mainstay of Iraq’s ambitions to transform its underperforming oil sector and bring output capacity to 12 million barrels per day (bpd), a huge increase from output now of around 2.5 million bpd.

The deals ratified on Tuesday were offered to foreign firms at a Dec. 11-12 energy auction, Iraq’s second this year.

Royal Dutch Shell, Europe’s largest oil company, and Petronas won the rights to Majnoon, a major field near the southern oil hub of Basra.

Majnoon, whose reserves of 12.6 billion barrels make it one of the world’s largest untapped fields, was one of the prizes on the block in that auction.

Major Success

After a more tepid showing in an initial auction in June, Iraqi oil officials hailed the December auction as a major success. Gharaf, a smaller oilfield with 900 million in reserves, went to Petronas and the Japan Petroleum Exploration Co (Japex).

Qayara and Najmah, located in Iraq’s restive north, were both won by Angolan state oil firm Sonangol.

The 800-million-barrel Qayara field is south of Nineveh province’s capital Mosul, while nearby Najmah has around 900 million barrels.

There are three deals from Iraq’s second bidding round that must still be ratified, including Halfaya, which was won by China National Petroleum Company (CNPC), Total and Petronas. Halfaya, in southern Iraq, has estimated reserves of 4.1 billion barrels.

Badrah, a 100 million barrel reservoir, is another. Badrah went to Russia’s Gazprom, Turkey’s TPAO, Kogas and Petronas.

Last but not least is West Qurna Phase Two, which was won by Russia’s Lukoil and Norway’s Statoil. The supergiant field has reserves of 12.9 billion barrel.

After the deals were initialled, the government said it was seeking a number of technical or operational amendments to the contracts.

“Sonangol was the first company to accept the proposed amendments followed by the other companies whose contracts were approved today by the cabinet,” said Sabah Abdul Kadhim, head of the legal and commercial section of the Petroleum Contracts and Licensing Directorate.

He said responses from the other companies were expected by Thursday. (Additional reporting by Ahmed Rasheed; editing by James Jukwey)

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