KUALA LUMPUR (Feb 21): Petronas Chemicals Group Bhd (PCG) said it has signed a memorandum of understanding (MOU) with Sarawak state-owned Sarawak Petchem Sdn Bhd to conduct a joint feasibility study to develop a low-carbon ammonia and urea plant in Bintulu, Sarawak.

This confirms a story by The Edge which reported that Petroliam Nasional Bhd (Petronas) and the Sarawak state government will sign a preliminary agreement to facilitate discussions and assess the feasibility of the project, citing sources.

The Edge on Tuesday reported that Petronas and Sarawak are considering a joint venture for a large-scale blue ammonia plant in the state, estimated to be worth about US$1 billion (RM4.8 billion).

In a joint statement on Wednesday, PCG said the two companies will conduct a joint comprehensive study on the technical and commercial aspects — among other considerations — in meeting rising demand for cleaner energy solutions by tapping into renewable energy potential within the region.

“This plant will have a future capability to produce ammonia with a very low carbon footprint; it is indeed a strategic initiative to capitalise on opportunities within the global energy transition market,” said Sarawak Premier Tan Sri Abang Johari Tun Openg, who witnessed the signing of the MOU.

The collaboration will allow the two parties to “capitalise on synergies, optimise costs, and share the risks” between Sarawak and Malaysia, Sarawak Petchem chairman Tan Sri Amar Abdul Aziz Husain said.

The joint development initiative serves as a catalyst for economic development in Sarawak in line with Sarawak Post Covid-19 Development Strategy 2030, Amar added.

PCG managing director and CEO Mazuin Ismail said the project is “potentially PCG’s first low carbon project”, and the collaboration with Sarawak Petchem facilitates its further expansion into the Southeast Asian urea market.

“Additionally, it presents an opportunity to leverage Sarawak’s RE sources while complementing our efforts in developing carbon capture and storage facilities,” Mazuin said.

Also present at the signing ceremony were Petronas chairman Tan Sri Mohd Bakke Salleh as well as president and group CEO Tan Sri Tengku Muhammad Taufik.

Low-carbon ammonia is predominantly utilised in hydrogen and power sectors for co-firing and bunkering, while urea serves primarily as a fertilizer, raw material for resins in plywood and adhesives, as well as diesel exhaust fluid for automotive applications, the statement said.

Sarawak Petchem, which owns a mega-methanol plant in Sarawak, is the first state entity to venture into downstream oil and gas activities. The plant is slated for operations in 2Q2024.

PCG has a total combined production capacity of 15.4 million tonnes of petrochemicals per annum, including olefins, polymers, fertilisers, methanol, other basic chemicals derivative products and specialty chemicals.