A Rapid white elephant in the making?

The RM60-billion oil refinery is meant to cater for China and India’s market, but PKR warns that such a stratergy can prove to be a costly gamble. 

Leven Woon, FMT

PKR warns that the RM60 billion Petronas Refinery and Petrochemical Integrated Development (Rapid) in Pengerang, Johor, may be a white elephant once it becomes operational in 2016.

Party trade and investment bureau head Wong Chen said this was because the refinery was export-driven and largely dependent on China and India’s demands.

Quoting Petronas downstream business vice-president Wan Zulkiflee’s statement in December 2011, Wong said the state-owned oil corporation had acknowledged difficulty in downstream-related businesses but was optimistic towards Rapid due to the robust growth in China and India.

However, he said poor economic sentiments had since emerged in the two countries, and an International Monetary Fund (IMF) report had cited a possible global economic crisis that might last for 10 years.

In addition, he said China and India had also embarked on their massive oil refineries and downstream projects.

“In tougher times, they will always favour domestic producers and boost utilisation of their own downstream facilities.

“In the meantime, Petronas’ Rapid will just be one of several regional players vying to supply these markets,” he told a press conference here today.

“If Petronas proceeds with its plans for Rapid, come 2016 when it becomes operational, the project may prove to be a gigantic white elephant,” he added.

Relocating to Kerteh

The corporate lawyer (photo below) noted that the downstream oil business, which included oil refinery and value-added industry, had become a tight-margined one due to soaring oil prices since 2002.

He questioned why Petronas was betting RM60 billion to invest in such a sector while major international oil companies such as Shell and Exxon adopted a wait-and-see approach.