Malaysian National Oil Firm Petronas Defers Sudan Refinery Project

Text of report in English by Malaysian official news agency Bernama website

[Bernama report from the "General" page: "Petronas Defers Sudan Refinery Project"]

Kuala Lumpur, June 9 (Bernama) -Petroliam Nasional Bhd (Petronas) has deferred plans for its oil refinery project in Sudan due to rising costs, president and chief executive officer Tan Sri Mohd Hassan Marican said Monday.

“The cost environment has gone up so much. When we look at the project at this point of time, we cannot justify its commercial viability because of the very high investment cost,” he told reporters at the 13th Asia Oil & Gas Conference here.

“So we have to defer for now. Like any other refinery projects around the world, we have to put it aside for now because of the cost of investment,” he said.

However, Mohd Hassan the industry was not putting aside projects per se.

“The industry is spending a lot more money today to explore and to find new resources. International oil companies exploration budgets are on the increase. The national oil company is doing the same,” he said.

Mohd Hassan said all oil companies were spending in double-digit billions to source resources.

“The industry in Malaysia, in upstream, is spending an average of about RM40 billion a year to explore new resources. This is a huge amount of spending in the Malaysian economy. In fact, 90 per cent of upstream activities is Malaysian-based,” he said.

On Indonesias Natuna-D Alpha natural gas block, Mohd Hassan said Petronas has the capability to invest in the project.

“If we dont have resources, we wont invest,” he said, adding that “it is not a secret” that Petronas is interested in the project.

However, he also said that this depended on whether the Indonesian government was looking for partners.

Petronas has now joined a list of companies trying to develop the block, which is reported to have the biggest gas field in Southeast Asia with 1.2 trillion cubic metres of recoverable gas reserves.

Other oil companies interested include Royal-Dutch Shell, Norway- based StatOil and PetroChina.

Interest in the block grew after the government decided to give state oil and gas firm PT Pertamina a chance to take over Natuna from US oil giant ExxonMobil following a dispute over the company’s contract extension on the block.

On the maritime dispute with Brunei which is close to large gas reserves, Mohd Hassan said that “the talks are still at the Foreign Ministry level”.

Both countries have reached a tentative agreement to end a maritime border dispute that halted oil exploration for almost five years and this development could lead to a resumption of oil exploration activities.

On another development, Mohd Hassan said Petronas was taking a step-by-step approach to expand within the Australian offshore, adding that any opportunity arising would be considered.

The national oil company announced on May 29 that it had acquired a 40 per cent stake in a proposed integrated liquefied natural gas (LNG) project in Gladstone, Queensland, for about US$2.5 billion from Santos Ltd of Australia.

The 60:40 joint venture company will be set up to develop and operate a gas liquefaction facility at Gladstone with an initial one- train capacity of three million tonnes per annum, Petronas said.

The new entity will also build and operate a 450-kilometre pipeline from jointly-owned upstream coal seam gas (assets to the project site, as well as undertake all marketing activities for the projects LNG output.

Originally published by Bernama website, Kuala Lumpur, in English 0703 9 Jun 08.

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