Malaysian O&G
RAPID delayed again

According to Reuters, PETRONAS will delay its RM60bn Refinery and Petrochemical Integrated Development (RAPID) in Pengerang with commissioning expected in 2018 (vs 2016 initially). This is the second time that PETRONAS pushed back the start-up of RAPID due to issues with the water supply as well as relocation of existing villages and graves in Pengerang.

The RAPID refinery is now scheduled to be ready for start-up in 4Q17 while the remaining plants within the development will be commissioned in 2018. PETRONAS has so far roped in Italy’s Versalis, Japan’s Itochu, Thailand’s PTT Global Chemical to participate in RAPID. Meanwhile, Taiwan’s Chinese Petroleum Corp was reported to have scrapped its investment plan in Pengerang, citing the radical change in the industrial structure of naphtha cracking.

The delay is not totally unexpected given the complications of this massive project. However, it is likely to have a negative impact on the local O&G players as the project was expected to create massive spill-over effects with the various jobs to be awarded. Dialog (Hold, RM3.20 TP) is currently the existing player with exposure to Pengerang by virtue of its deepwater independent terminal. The first phase is set to be operational by 1Q14 but we believe that the second phase may be delayed as well as the tank capacity was dedicated for the RAPID project.

Petronas Chemicals’ (Hold, RM6.15 TP) growth prospects could be affected as it is likely to play a substantial role in the petrochemical projects. Meanwhile, other players such as MMHE (Hold, RM3.30 TP), SapuraKencana (Buy, RM4.85 TP), Pantech (Not rated) and Muhibbah (Buy, RM3.10 TP) may have to wait a little longer before PETRONAS starts to dish out contracts.

Source: HwangDBS Research - 31 Jul 2013