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Promoting downstream oil and gas industry

by

Chief Operating Officer Of Johor Petroleum Development
CORPORATION BERHAD (JPDC)

The PIPC sits on a 20,000-acre piece of land in Pengerang, in Malaysia’s Johor state. The PIPC is designed to accommodate downstream oil and gas industrial facilities such as refineries and petrochemical plants, deep-water terminal and storage tanks, naphtha crackers, regasification plants and supporting facilities, as well as manufacturing plants and industrial parks.

To be developed in phases, the PIPC covers both core and non-core downstream activities. Included in the PIPC master plan are designated areas for related support services such as a plastic and fine chemicals park, a light and medium industrial park, a waste management center, an emergency response center, a logistics hub, a commercial hub and others.

The striking attraction of the PIPC lies in the robust design of the PIPC master plan that strives to enable and promote future growth and sustainability, by offering a wide spectrum of investment opportunities targeted at downstream oil and gas players.

Being a project of national strategic importance, the PIPC is given perks with the government of Malaysia’s prioritized support. This can be seen with the establishment of the Johor Petroleum Development Corporation Berhad (JPDC), a dedicated federal government agency mandated to plan, coordinate, facilitate and promote the overall development of the PIPC. The JPDC covers the depth and breadth of a “project manager” role in making sure the development of the PIPC is on track, according to plan and with sufficient funds. It is under this purview that the JPDC provides guidance to potential parties seeking to invest in the PIPC.

Further evidence of government support can be seen through the development of world-class infrastructure and public amenities for convenient mobility and connectivity, as well as improved quality of living for all dwellers of Pengerang.

Additionally, a further benefit lies in having a dedicated government forum to fast track development of the PIPC, supported by the strong involvement of both the federal government of Malaysia and the state government of Johor.

There are other forms of incentives applicable to investors, both local and foreign. These include investment tax allowances, import duty exemptions, reinvestment allowances and others. These incentives may vary between plans and structures, depending on the status of companies investing in Malaysia or the PIPC. The JPDC, being the appointed organization to oversee the overall development of the PIPC, collaborates with the Malaysian Investment Development Authority (MIDA) to actively guide investors, and potential investors alike, to the applicable incentives.

Two investors, one of them Malaysian and the other a joint venture of a Malaysian company and a Dutch company, are already in the PIPC. We welcome diverse investors.

We have been targeting petroleum and petrochemical storage terminal investors, intermediate petrochemical companies, integrated petrochemical companies (with naphtha cracking facilities) and specialized petrochemical companies for collaboration. In order to realize that, we have been organizing one-to-one business meetings in targeted countries, participating in investment trade missions with MIDA and the Johor state government, as well as taking part in major downstream oil and gas exhibitions such as the Asia Oil and Gas Conference, Oil and Gas Asia and others.

And of course, we are interested in bringing in Japanese investors. We see this as an ideal time for Japan to invest in the PIPC.

In Malaysia’s context, the weakened ringgit against major currencies has made it an attractive destination for investors. For Japan, this translates into a lower cost of doing business and an opportunity for it to diversify its business in the PIPC.

As mentioned earlier, the PIPC will house oil refineries, naphtha crackers, petrochemical plants that will produce feedstock for companies focused on the manufacturing of downstream products such as plastics, packaging, automotive components and chemicals. When investing in the PIPC, petrochemical and manufacturing companies from Japan can expect to have access to raw materials nearby, resulting in reduced operating costs and improved profit margins.

Apart from that, Japan has always been among our main trade partners and we acknowledge Japan’s reputation as having some of the top companies in the world when it comes to specialty chemicals. We are always interested in welcoming these companies to come and invest in the PIPC, not only because of the above mentioned reasons, but because we can also benefit from the technology and skills they bring in.

The inception of the PIPC began with the launching of the Economic Transformation Programme (ETP) on Sept. 25, 2010, that seeks to transform Malaysia into a high-income nation by 2020.

Twelve industrial sectors were identified to drive the ETP, and the key thrust to achieving the ETP for the oil, gas and energy sector is by implementing two Entry Point Projects. These include building a regional oil storage hub and increasing petrochemical output by developing integrated refinery and petrochemical complexes.

The formulation of the PIPC is hinged on the mission that it will be able to add value to the crude oil that Malaysia produces and simultaneously monetize the strategically located extensive land with its natural deep-water port in Pengerang.

The PIPC is expected to generate gross national income (GNI) of $489 million and 4,883 new high-income jobs by 2020, and GNI of $2 billion and 27,064 new high-income jobs in the subsequent phase of completion.

The PIPC is set to have oil refining capacity of 1 million barrels per day, production of 11.8 million tons of petrochemicals per day, 5 million cubic meters of oil storage and an annual capacity for 3.5 million tons of liquid natural gas regasification by 2020.

JPDC collaborates with key stakeholders, government-related agencies and industry experts in ensuring equitable participation among Malaysians in general, and the residents of Pengerang specifically, empowering them to tap into the economic space of the PIPC.

To date, a series of re-skilling and up-skilling training programs for more than 2,000 locals has been coordinated and facilitated by the JPDC. These programs are aimed at creating a downstream oil and gas industry workforce with an impressive 93 percent employability rate.

Compared to other regions or similar projects, the PIPC possesses more strength with access to existing major international shipping lanes between the Middle East and China. The proximity of Pengerang to Singapore is a huge benefit, as Malaysia’s refinery hub has to be close to the world’s commodity traders that are largely based in Singapore. Apart from that, the PIPC has water depth of more than 24 m with a harbor that is safe and sheltered throughout the year. With no breakwater, it enables very large crude carriers (VLCC) and ultra large crude carriers (ULCC) to operate. It also has few environmentally sensitive areas and these can easily be preserved. These key strengths make it the ideal location for the development of a major integrated petroleum complex. When fully completed, the PIPC will have a complete portfolio of products, full trading facilities and will be a center of excellence for downstream oil and gas for the country and region.

Adding value to the chain of attractions of the PIPC is the readiness of good infrastructure and public amenity projects catered for industrial use and tenants of the PIPC, as well as surrounding areas. These projects are crucial as they provide modern means of access such as transportation and internet connectivity, as well as conducive working and living environments. To date, 52 percent of the infrastructure and public amenity projects have been completed and are in operation, including an upgrading of roads, drainage systems, medical clinics, schools, fire and police stations, day care centers and others.


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