Malaysia’s state oil firm Petroliam Nasional, or Petronas, is pushing ahead with plans to start operations in 2019 at a large refining and petrochemical complex in the southeast of the country despite Saudi Aramco ditching plans for a joint venture.
The Refinery and Petrochemical Integrated Development, or RAPID, project is part of Petronas’ Pengerang Integrated Complex, or PIC, estimated to cost as much as $27 billion.
It is designed to have a 300,000 barrels per day oil refinery as well as a petrochemical complex with an annual capacity of 7.7 million tons a year.
Sources familiar with the matter told Reuters on Wednesday that Saudi Aramco had shelved plans for a partnership with Petronas on the project, raising questions about its future.
Despite this, Petronas said the project was going ahead.
“Petronas would like clarify that its Pengerang Integrated Complex project will continue to be the focus of its downstream growth agenda in the coming years,” the company said in a statement emailed to Reuters.
“Despite the current slowdown in the world economy and depressed oil prices, the investment remains a priority for Petronas.”
Petronas said that the facility was currently 54 percent complete and on track to become operational in 2019.
The statement made no reference to Aramco, Saudi Arabia’s state-run oil and gas giant.
Aramco’s move to suspend plans for the Malaysian venture comes at a time when Petronas is struggling with a slump in oil prices.
In early 2016 Petronas said it would cut spending by up to 50 billion ringgit ($11.29 billion) over the next four years. It has also slashed the dividend it pays to the Malaysian government.
RAPID and PIC form part of the much larger Pengerang Integrated Petroleum Complex, or PIPC, in the southern Malaysian state of Johor, next door to Asia’s oil trading hub of Singapore.
If fully developed to plan, PIPC will eventually include naphtha crackers and facilities to import and export liquefied natural gas, or LNG.
The ambitious project would add the full value chain of refined fuel and petrochemical products to Malaysia’s dwindling crude oil and natural gas reserves.
Such plans, however, rely on participation of foreign companies and investors who have become much more hesitant since oil prices halved in 2014 to around $55 per barrel now.
Sources said Saudi Aramco pulled back in an effort to save cash ahead of its planned initial public offering, and to avoid undermining profit margins of other refinery assets in owns in Asia.