RM63.0 B Rapid Project Axed – A Petronas Fumble?

ARCHIVES 2013

By admin-s On Aug 28, 2013

The question is what is the problem with Petronas’ project planning that they had to delay (already) and now want to cancel a RM63.0 Billion project? This is not good planning.

OutSyed the Box

There is some not very good news from Petronas. I hope this is not a precursor to a more worrying trend. I know you will say that this is Syed Akbar being pessimistic again (Club of Doom). But it is all really happening.

First there was a delay in the RM63.0 Billion project in Pengerang.

Petronas to delay RM61.3bil refinery project to 2018
start up refinery within RM61.3bil petrochemicals complex at end 2017
a further delay in the country’s largest-ever infrastructure project
potential blow to economy
project complicated by need to secure water supplies
final investment decision (FID) to the first quarter next year
citing state government problems in relocating villages and graves

That was old news. Now the latest news says Petronas is going to kill the RM63.0 Billion Rapid Project altogether.

This is going to cause disaster for many in Pengerang as well as slow down the bumiputra and non bumiputra economy throughout the country.

The question is what is the problem with Petronas’ project planning that they had to delay (already) and now want to cancel a RM63.0 Billion project? This is not good planning.

This is not a 200 unit condo project in Old Klang Road that may not change the colour of the sunset if it is postponed or cancelled.

The Rapid Project is an RM63.0 Billion project that can create tens of thousands of jobs, create billion Ringgit spinoff industries and redefine the petrochemical industry in South East Asia. It puts Pengerang on an equal or even better footing than Singapore as the refining and petro-chemical hub.

Is there any element of “meddling” to cancel this project in favour of Singapore? There is plenty kiasu across the causeway over projects like these. And will anyone get paid compensation for the cancellation?

This is from Star Biz here

Petronas will review costs, delay or differ implementation
Petronas (said) cost remained a major concern
especially in light of downtrend in crude oil prices
final investment decision on Rapid will be made in March
We would not embark on projects that would not be feasible..
upstream costs a worry, oil & gas infra, support services rates rising

Shamsul (left) and chairman Sidek Hassan

“costs are creeping up
“.bulk of expenditure for upstream activities, 65% of total portfolio
scrap the project if the numbers are not right
silly to proceed if there’s no economic return
take into consideration agreements with foreign investors
signed four heads of agreements
based on US$100 – 110 per barrel, pre tax of RM91bil to RM92bil for year
dividend to Government RM27bil this year compared to RM30bil last year
nothing definitive
marginal drop in net profit to RM15.26bil for 2nd qtr ended June 30
lower margins, higher operating expenses, lower gain on disposal
Revenue 5.17% higher RM74.42bil driven by higher crude & gas trading volume
increased trading opportunities and stronger customer demand
total production rose 11.89% to 2.07 million barrels per day (in the qtr)
gas production was 154,000 boe per day
cash and equivalents of RM122.1bil June 30, gearing fallen by 0.6% to 11.1%.

I have been hearing things about Petronas since about two years ago. The Prime Minister has appointed this particular punahsihat as a Board Member of Petronas. Undoubtedly he is the most powerful Board member.

Among the more inexplicable things that Petronas has done recently under his watch is make undetectable changes to their logo.

While the change in the logo does not make any difference to the seagulls who aim at them, it has certainly cost Petronas tons of money to rebadge all their facilities, ship tankers and other assets. And the CEO now says ‘costs are creeping up’.

Actually there appears to be more to the CEO’s one liner. Lets relook what he said :