Malaysia moves forward with Kedah refinery plans

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Mar. 6 -- Work on a Malaysian refinery complex, part of the planned Sungai Limau hydrocarbon hub project formerly known as the Yan petroleum industry zone, is expected to start in July.

Apart from the complex itself, the project includes a 320-km oil pipeline from Yan in Kedah state to Bachok in Kelantan state, as well as a 50-km pipeline to transport oil from Kuala Jerlun to Bukit Kayu Hitam.

"We expect to receive the environmental impact assessment approval soon to be followed by land reclamation work," said Azizan Abdul Razak, the head administrator of Kedah state.

The project, supported by refiners Merapoh Resources Sdn. Bhd. and Hijaz Refinery Sdn. Bhd., is due to start up in 3 years.

Last August, the Kedah state assembly was told that two refinery projects—at the Sungai Limau hydrocarbon hub and the Jerlun-Kota Perdana petroleum industrial zone—would be implemented only after receipt of environmental impact reports.
Ir Amiruddin Hamzah, Kedah state industry, investment, science, and innovation committee chairman, said the projects would take time to be implemented as the state government had to wait for the environmental impact reports.

"The Kedah population will gain from the offshore project," said Azizan Abdul Razak, adding that it would generate annual revenue of 297 million ringgits ($80 million) for the Kedah state government.

Other refineries
Meanwhile, the Malaysian government is involved in discussions for several other refinery and petrochemical complexes.

In January Qatar's Gulf Petroleum Ltd. said it would continue with plans to invest up to $5 billion in a refinery and petrochemicals complex in Malaysia's northwestern state of Perak.

It said, Gulf Petroleum "has no plan to cancel or defer the development of an integrated oil and gas complex in Malaysia despite the global financial crisis and oil price drop."

Gulf Petroleum Pres. Abdulaziz Hamad Al-Delaimi said a number of financiers and investors, particularly from the Arabian Gulf countries, were still showing their "keen interest to finance the project" due to its viability.

The initial plan called for a $1.5-2 billion investment to build a 100,000-150,000 b/d refinery followed by $1.5-2 billion for petrochemicals plants and a further $1 billion for storage.

Gulf Petroleum, which said it already had secured oil supplies and product offtake agreements for the project, will appoint a company to undertake the environmental impact assesment for the plant.

Meanwhile, officials from Sudan and Malaysia's state oil company Petronas are scheduled to meet this month to discuss plans for a delayed joint venture refinery project in Sudan.

"We are meeting with our joint venture partner to see how we can move forward with this project," Sudanese Energy and Mines Minister Al-Zubeir Ahmed Al-Hassan said in January.

Petronas signed an agreement in August 2005 to invest in the refinery, which would process some of Sudan's Dar Blend crude.

However, last June, Petronas Chief Executive Hassan Marican said his company had deferred plans to build the 100,000-b/d refinery in the African country due to rising costs, estimated to have jumped to about $5 billion from $1-2 billion when it was first planned.

Contact Eric Watkins at hippalus@yahoo.com.

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