Get Cracking

Oil and gas that comes out of the Earth is only as valuable as the facilities available to refine it, the “downstream” part of the process, and something that could become even more important to the industry as standards for fuel become stricter alongside growing demand. In 2019, the oil and gas industry will get another hub that can help it get their product to consumers.

PRefChem, a joint venture between the Malaysian and Saudi national petroleum companies, Saudi Petronas and Saudi Aramco, will open at Pengerang Integrated Petroleum Complex at the southern tip of Malaysia, along the shore of the highly trafficked Singapore Strait. The new facility, named RAPID, or Refinery and Petrochemical Integrated Development, will provide a new way of turning crude oil into something ready for gas tanks and manufacturers around the world, with a 300,000bpd capacity. The production facility will turn crude into polymers and synthetic polymers that have many uses further downstream.

The Pengerang complex already processes 7.7 million tons of material each year, according to Reuters, and RAPID will add to this capacity. It is part of a larger Saudi strategy, analysts say, that seeks to start joint ventures in refineries across the world, in Pakistan and South Africa. These joint ventures bring a boost of construction jobs and then steady employment for thousands of locals after they are built.

Although Saudi Arabia and Malaysia are orchestrating the megaproject, the massive terminal itself has already offered opportunities to international companies such as Fluor, a contractor that builds petrochemical refinery plants, from worker housing to laboratories.

“PIC is a keystone project in the Malaysian Government’s overall Economic Transformation Programme (ETP). It will position Malaysia to capitalize on the growing demand for energy and petrochemical products in Asia as well as further diversify the PETRONAS portfolio beyond upstream oil and gas and into refined fuels and high value petrochemical products,” Fluor’s website states.
“The various process units are being executed by numerous contractors based in Malaysia, Taiwan, China, Japan, India, South Korea, Spain, and Italy with a workforce originating from over 40 nations.”

Malaysia’s geographic position makes it a key hub for global trade, sitting between the massive markets of India and China, where manufacturers demand more raw petrochemical derivatives, and consumers cannot maintain a modern lifestyle without access to plastics. RAPID is set to step in to fill that demand in the eastern hemisphere in East Asia and South Asia, home to most of the world’s population. Malaysia is in the center of that sprawl, and soon RAPID will be, too.

In 2018, Saudi delivered 2 million barrels of oil to help RAPID start its processing. Saudi oil will comprise 70% of RAPID’s need for raw material, while Malaysia will provide the natural gas, as well as electricity to keep the facility up and running.
RAPID’s opening will represent a further shift in refining capacity to Asia, according to S&P Global Platts, a market analytics firm.

“Global refiners will add 1.87 million bpd of CDU capacity in 2019, and the Asia-Pacific region will account for 61% of those additions, taking total Asian CDU capacity to over 37 million bpd by the end of 2019,” according to a Platt’s report. “Asia’s share of global CDU capacity is expected to rise to 37% in 2019.”

RAPID will also be able to refine crude oil to higher standards demanded by new maritime emissions standards set to come into force in 2020, and comply with Euro-5 fuel requirements. Smog and sulfurous air have become serious problems in growing cities in China and India, good news for any facilities built to produce less dirty fossil fuel derivatives.

While global action to address climate change appears to be on hold given Washington’s disinterest in the topic, this phenomenon is unlikely to last. And while burning oil for transport or gas for heat might fall under stricter regulatory scrutiny, or even experience weakening demand, manufacturing any consumer product requires a supply of petrochemical derivatives. RAPID, Malaysia, and Saudi Arabia are all betting there is a great future in plastics.