* Pengerang refining and chemicals project nearly 50 pct
* Downstream operations have become crucial -Petronas
* Plans aggressive expansion of lubricants business in
* Expects new floating LNG plant to be running by early 2017
By Giancarlo Navach and Stephen Jewkes
MILAN, Sept 6 Malaysia's state-owned oil and gas
company Petronas is on track to get its $27 billion
refining and petrochemical complex in the south of the country
up and running in 2019, the head of the group's downstream
operations told Reuters.
Petronas has earmarked heavy spending cuts to contend with
low oil prices that have sent profit tumbling, but the company
remains committed to the Refinery and Petrochemical Integrated
Development (RAPID) project it aims to turn into a regional oil
and gas hub by 2035.
"By the end of the year we should have completed more than
50 percent of the complex and we're on track to start operations
in the first quarter of 2019," said Md Arif Mahmood, Petronas
downstream CEO and group executive vice-president.
The project, launched in 2012 at Pengerang in the southern
state of Johor, will consist of a 300,000 barrel per day
refinery and petrochemical complex with combined annual chemical
output capacity of 7.7 million metric tonnes.
Other facilities include a liquefied natural gas (LNG)
"There are 4 billion people in southern Asia and future
growth will be there as the number of middle-class income makers
grows," Mahmood said.
TWEAKING THE FOCUS
Like other energy companies, Petronas has cut costs, laid
off workers and deferred investments to offset the slide in
It has earmarked more than 10 billion euros ($11.2 billion)
of capital expenditure cuts over the next three to four years
and is looking to maximise other revenue streams outside
"With the new norm for crude at $40 to $50 a barrel,
downstream has become a critical component, it flies the flag of
the company," Mahmood said.
In Italy to attend the Formula 1 Grand Prix at Monza
(Petronas is sponsor of the Mercedes F1 team), Mahmood said that
the company's growth in Europe would be focused on expansion of
its lubricants business.
"We have an aggressive plan to grow in Germany, the UK,
Ireland and Italy," he said.
Europe is one of the company's main lubricant markets,
generating 28 percent of the group's total volumes. Italy is the
biggest market, accounting for 48 percent of European sales.
In chemicals, Mahmood said the group would maximise benefits
from its partnership with Germany's BASF, though a
planned joint venture in synthetic rubber with Italian oil major
Eni's Versalis has been abandoned.
"We've both decided not to go ahead because of market
conditions," Mahmood said.
Besides the RAPID project, Petronas has ambitious plans in
LNG and Mahmood said it hopes to gain long-awaited environmental
clearance for a $35 billion LNG export terminal in western
Canada by the end of the year.
Petronas has been waiting more than three years for a permit
to start building the Pacific NorthWest terminal and some
analysts have said that LNG oversupply and lower oil and gas
prices now threaten to make the project
"We are committed at the moment, but first we need to see
what the conditions of approval are," Mahmood said.
The company, which is one of the world's largest LNG
producers, is also on track with construction of a $12 billion
offshore LNG plant that it touts as the world's first floating
"You'll see production at the end this year or early next,"
Mahmood said, adding that commissioning is also under way for a
ninth production line at the group's Bintulu LNG complex in
($1 = 0.8970 euro)
(Editing by David Goodman)