Saudi state oil giant Aramco is going to transfer its equity stakes in the PRefChem refining and petrochemical joint ventures in Malaysia to partner Petronas, announced the two companies, ending an eight-year downstream partnership in Southeast Asia.
As per the declaration, the deal, subject to closing conditions, will make PRefChem a wholly owned subsidiary of the Malaysian state energy company. The development also gives a glimpse of the kind of financial struggles energy companies are undergoing due to the ongoing Iran war, which, along with the trade disruption at the Strait of Hormuz, has not only slashed crude oil flows across Asia but has also forced refiners to cut production runs. The phenomenon has triggered shortages of jet fuel, gasoline and diesel, products produced by PRefChem.
PRefChem’s full ownership will give Petronas the flexibility to source crude beyond the Gulf and direct output to meet surging regional fuel demand. Aramco, on the other hand, has been forced to cut production due to the Iran war, with Saudi output falling roughly a third in April from the pre-conflict levels, as per OPEC’s secondary sources.
“The transaction was concluded on mutually agreed terms, reflecting the evolving strategic priorities of both parties,” reported Reuters.
PRefChem comprises two joint ventures, Pengerang Refining Company and Pengerang Petrochemical Company. Both of them operate an integrated refinery and petrochemical complex within the Pengerang Integrated Complex in the southern Malaysian state of Johor.
The refinery has a capacity of about 300,000 barrels per day and produces fuels including jet fuel, gasoline and diesel while supplying feedstock to the petrochemical complex, which has a nameplate capacity of about 3.4 million tonnes per year. Under the eight-year downstream partnership, Aramco had been supplying 50% to 70% of PRefChem’s crude feedstock.
In 2017, Aramco agreed to invest USD 7 billion for equal participation in the project, signing a share purchase agreement during a state visit to Malaysia by King Salman bin Abdulaziz Al Saud. Back then, the development grabbed headlines, as it was then one of the energy giant’s largest downstream investments abroad. The two joint ventures were formally established in March 2018.
Both Petronas and Aramco said they would keep exploring cooperation-related opportunities in domains like crude supply, technology exchange and product distribution.