New Straits Times
08th February, 2019

KUALA LUMPUR: With the start-up of the Petronas’ Refinery and Petrochemical Integrated Development (RAPID) project in Pengerang around the corner, Asia’s refining capacity growth will experience a boost in 2019, says S&P Global Platts.

The start-up of the 300,000 barrels refining capacity per day project will also increase Saudi crude inflows to the region and add to the supply of refined petroleum products. This will underscore the shift of global refining capacity growth to Asia where the bulk of the demand growth is concentrated. The refinery, located in the southern state of Johor, has fired up its crude distillation unit and is expected to be ready for commercial operations by the fourth quarter of 2019.

The facility will produce refined products including gasoline and diesel that meet Euro 5 fuel specifications and provide feedstock for the integrated petrochemicals complex with a capacity of 3.3 million metric tonne per year. S&P Global Platts, an energy and commodities information source also noted while China continues to dominate Asian refining capacity growth, Southeast Asian capacity additions this year are significant, mainly from RAPID and Brunei’s Hengyi refinery in the second half of 2019.

Hengyi has a capacity of refining 160,000 barrels per day. S&P Global Platts in its latest Asia Pacific Oil Market Forecast report, further noted that the project is designed to meet both domestic fuel demand in Malaysia and export surplus volumes although currently, domestic fuel demand is likely to be affected by lukewarm economic growth.

“PIC will add to refined product supply at a time when higher Chinese exports will add to Asia’s diesel surplus and pressure refinery margins, at least until the impact of the International Maritime Organisation 2020 (IMO 2020) regulations start to tighten the market,” the firm said.

Asian refining margins are expected to average $4.40 a barrel in 2019, up from $3.30 a barrel in 2018, according to Platts Analytics, which expects Asian product markets to tighten in the second quarter due to heavier refinery turnarounds.

S&P Global said RAPID is also key to Saudi Aramco’s marketing strategy as it will supply half of the refinery’s crude feedstock, with the option of increasing it to 70 per cent while Petroliam Nasional Bhd (Petronas) will supply the natural gas, power and other utilities needed to run the plant.

It also noted that Aramco has been chasing markets in the east as key consumers like the US have boosted domestic production.

Touching on crude distillation unit, the firm said global refiners will add 1.87 million barrels of CDU per day capacity in 2019 and the Asia Pacific region will account for about 61 per cent of those additions, taking total Asian CDU capacity to over 37 million barrels per day by the end of this year.

As a result, Asia’s share of global CDU capacity is expected to rise to 37 per cent in 2019, said Platts Analytics.The jointly held Saudi Aramco-Petronas US$27-28 billion Pengerang Integrated Complex (PIC) is preparing for official startup of RAPID.

Its mechanical completion was achieved on November 29, 2018 and all critical units under contractor Petrofac Ltd’s scope have now started commissioning activities in advance of the fire up of the refinery’s crude distillation unit later this month.

The delivery of the first cargo of 2 million barrels of crude supplied by Petronas and Aramco to the site was done in September 2018, to be used for commissioning and testing activities at the refinery in October last year.

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