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Saudi Aramco has pulled out of a planned joint venture with Malaysia’s state-owned oil company Petronas, concerning the construction and operation of a major refining and petrochemical complex in southern Malaysia, according to sources close to the deal.
The multi-billion-dollar Refinery and Petrochemical Integrated Development was planned to have a daily throughput rate of 300,000 barrels of crude, producing 7.7 million tons of petrochemicals annually. The complex would have also included a regasification terminal for LNG.
No reasons were given for the shelving, either by Aramco or by Petronas, with both companies telling the WSJ that they did not comment on speculation.
The Malaysian company last year sought to borrow US$7.2 billion to advance the project, estimated to be worth some US$20.1 billion. According to the Wall Street Journal, Aramco has concluded after a feasibility study that the project will not yield the desirable level of returns.
Both Aramco and Petronas have been hit by the oil price crash and it makes sense for the world’s largest oil company, by output, to be more cautious with future projects especially in light of its upcoming IPO in 2018. Yesterday, media reported that Aramco is seeking advisers on the listing, sending out requests for proposals to large and small investment banks. Aramco expects the IPO to bring in some US$100 billion for 5 percent of the company.
Petronas, for its part, has been looking for new revenue streams after having to axe 1,000 jobs and squeezing capex by US$11.3 billion (50 billion ringgit) over the period from 2016 to 2020.
The Malaysian company last month announced it had found a new location for its US$27-billion LNG project in Canada, the Pacific NorthWest LNG, in response to environmental opposition to its first choice of location. The final investment decision on this project should be made by the end of the first quarter.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.