Petronas nears restart at Malaysia’s Pengerang refinery

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.

The Pengerang complex in southern Malaysia has been shut since a fire 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.

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.

The project was originally due to come on line in April 2019, but start-up was pushed back by a fire and explosion 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.

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 Australia , New Zealand and the Philippines .

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.

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.

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.

By Kevin Foster

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