<article><p class="lead">Malaysia's state-owned Petronas is on course to restart its 300,000 b/d Pengerang refinery joint venture with state-controlled Saudi Aramco in the first quarter of 2021, adding more capacity to a struggling Asia-Pacific refining market.</p><p>The Pengerang complex in southern Malaysia has been shut since a <a href="https://direct.argusmedia.com/newsandanalysis/article/2087253">fire</a> in March. Petronas said late last week that the project is transitioning to commercial operations and a restart of the refinery and petrochemical plants is planned for the first quarter of next year, in line with previous expectations. </p><p>The project's atmospheric residue desulphurisation trains are also expected to be ready for start-up in the first quarter. Repairs are continuing on the diesel hydrotreater, which is targeted to come on line in October-December 2021. Aramco owns a 50pc stake in the project and will supply half of its crude, with the option to increase this to 70pc once the refinery is fully commissioned.</p><p>The project was originally due to come on line in April 2019, but start-up was pushed back by a <a href="https://direct.argusmedia.com/newsandanalysis/article/1884052">fire and explosion</a> that month. Petronas and Aramco started to bring the refinery's crude distillation unit on line in August last year, before progress was halted by the latest fire.</p><p>The Pengerang restart threatens to put more pressure on a crowded and oversupplied east Asian refinery sector. Lower demand for transport fuels because of the Covid-19 pandemic, weaker margins and rising competition from China have left over 500,000 b/d of capacity at the risk of closure, mainly in <a href="https://direct.argusmedia.com/newsandanalysis/article/2155162">Australia</a>, <a href="https://direct.argusmedia.com/newsandanalysis/article/2142931">New Zealand</a> and the <a href="https://direct.argusmedia.com/newsandanalysis/article/2148307">Philippines</a>.</p><p>Petronas ran its Malaysian refineries at 82.6pc of capacity in the first nine months of this year, down from 91.5pc a year earlier as the coronavirus outbreak hit demand. Operations at its petrochemical plants edged up to 94.5pc from 92.8pc in the same comparison.</p><p>Upstream production slipped by 3pc from a year earlier to 1.62mn b/d of oil equivalent (boe/d) in January-September, although crude and condensate output was up by 4.5pc to 587,000 b/d. </p><p>Petronas made a net loss of 3.38bn ringgit ($830mn) in July-September, after recording a 7.4bn ringgit profit a year earlier. It expects fourth-quarter performance to be affected by a "challenging business environment" because of prolonged low oil prices and only a moderate demand recovery amid the Covid-19 pandemic.</p><p class="bylines">By Kevin Foster</p></article>
