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Petronas’ PIC project seen as vital for country’s downstream sector
Petronas’ Pengerang Integrated Complex (PIC) project in Johor is vital for the country’s downstream sector, said analysts.
“It makes sense for the country to refine its own crude oil and produce higher value-added petrochemical products, to better manage our oil and gas resources, especially with the expected increase in production from the various upstream initiatives.
“Despite being the 29th largest crude oil producer in the world, we export and import almost the same amount of refined petroleum products,” Hong Leong IB Research said in a statement on Friday.
With the PIC project, the research house said the country’s total refining capacity would increase to 935,300 barrels per day (bpd), from the current 635,000 bpd, while petrochemical related products are expected to increase from 2.6 million metric tonnes per annum (MTA) to 6.5 MTA.
Meanwhile, Maybank IB Research said Petronas needs to diversify its downstream business to retain productive investments in Malaysia, as the subsidy burden has been partly lifted from Petronas’ shoulders with the government’s ongoing fiscal measures, which include subsidy rationalisation.
The PIC will comprise a world scale Refinery and Petrochemical Integrated Development (RAPID) and other associated facilities.
Maybank IB Research said the final investment decision by Petronas’s board for PIC to go ahead, although the RAPID project has been scaled down to US$16 billion (RM52.5 billion) from the earlier proposed US$20 billion, is crucial and key to kick-starting the major project.
“This mega project will have massive multiplier and spin-off effects, with the creation of a strategic petrochemical and refinery hub in Asia, to an oil trading hub, and potentially a new crude benchmark,” said Maybank IB Research in a statement today.
The research houses are maintaining a positive stance on the oil and gas sector.
Hong Leong IB Research sees onshore fabricators/process equipment providers like KNM, Muhibbah, Eversendai, MMHE, Pantech and downstream players like Dialog, Petronas Chemicals and Petronas Gas with the potential to leverage on the RAPID project.
Maybank IB Research says Dialog is a prime beneficiary, adding Petronas Chemical could participate in the petrochemical operations and refineries.
“MPHB and IJML have large land exposure next to RAPID and will gain from the rise in commercial land values there,” it said.
Stocks that are poised to benefit from the mega project are Dialog, WCT, IJM Corp and MPHB, with target prices of RM3.90, RM2.55, RM6.75 and RM2.42 respectively, it added.
