With Asian refining profits remaining weak because of still-depressed demand for oil products, Royal Dutch/Shell is looking to sell its 45,000 b/d refinery at Lutong, Malaysia, in order to cut costs.
The news came just as Shell announced completion of an upgrade at its larger, more complex refinery at Port Dickson, Malaysia. The capacity of this plant was expanded to 155,000 b/d from 105,000 b/d, and a 6,000 b/d atmospheric resid FCC unit was added.
Megat Zaharuddin Megat Mohd Nor, chairman and CEO of Shell Malaysia, says Shell has been in discussions with potential buyers for the Lutong refinery. If the right price is offered, Shell will sell the plant, he said.
Shell hopes to buy refined products from the future owner to supply the Borneo market, added Megat Zaharuddin.
A local analyst said the refinery could fetch about $90 million, although Shell may have to offer a large discount because of soft products demand.
The move suggests that Shell wants to focus on its operations in peninsular Malaysia, site of its Port Dickson refinery and most of its 860 Malaysian retail outlets. The company wants to add 40 more retail outlets in Malaysia during the next 5 years, said Megat Zaharuddin.
Competition in the Malaysian retail sector has been escalating, with Conoco Inc. planning to add 100 fuel stations in the next 4 years (OGJ, May 10, 1999, p. 36).