(Bloomberg) -- Petronas Chemicals Bhd., a unit of Malaysia’s state energy company, said it’s in talks with petrochemical firms from Asia and Europe to invest in a $27 billion oil refining and petrochemical project, sustaining hope the country can find a partner after at least three previous deals fell through.
Companies from Japan, South Korea, China, Taiwan and Italy have expressed interest in joining the Refinery and Petrochemicals Integrated Development, or RAPID, said Chief Executive Officer Sazali Hamzah, declining to identify them. Earlier plans by Petronas Chemicals’ parent, Petroliam Nasional Bhd., to develop petrochemical plants at the complex in the southern state of Johor with Evonik Industries AG, BASF SE and Kuokuang Petrochemical Technology Co. never materialized.
RAPID, announced in 2011 and originally scheduled to start last year, got a boost last month when Saudi Arabian Oil Co., the world’s biggest oil exporter, said it will invest $7 billion. Talks that led to the deal with the world’s biggest oil exporter, known as Saudi Aramco, started in at least 2014, Sazali said.
“It’s really a tough time to find investors, especially in oil and gas because of the uncertainties of the oil situation,” Sazali said Monday in Kuala Lumpur. “If everyone’s agendas can be aligned, then it will happen.”
As RAPID’s development accelerates, Petronas Chemicals plans to increase capital spending by as much as one-quarter this year and next from last year’s roughly 4 billion ringgit ($900 million), Sazali said. The company used an oil price assumption of $50 to $60 a barrel when it budgeted for the project in 2015 as part of its “new normal,” he said.
Brent crude, the global benchmark, has averaged about $55 this year, down from almost $100 in 2014. Shares of Petronas Chemicals have risen 4.9 percent this year, matching the gain in the benchmark stock index.
The increased spending will help raise production capacity of basic chemicals to 16 million tons a year by 2020, from 10.8 million tons now, with most of that coming from RAPID, Sazali said.
"RAPID provides full integration of infrastructure and support facilities" and also sizeable land for future expansion, Sazali said. Subsequent investments beyond the current RAPID project would enjoy freight savings and that’s one reason Rapid could appeal to and attract potential investors, he said.
The company also wants to expand further into derivative and specialty chemicals and is evaluating the production of ethylene, propylene and butadiene derivatives, he said. RAPID will remain its focus over the next few years and the company will only actively seek overseas acquisitions next decade, Sazali said.
The company is targeting a utilization rate of as high as 90 percent for its plants this year, he said. Pre-tax profits last year would have been about 20 percent lower if it hadn’t pushed rates to a record 96 percent, according to Sazali.
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