Fuel Juggernaut Coming As Saudi Backed Petronas Refinery Starts - As China sends a flood of fuel abroad, a giant project in Southeast Asia that’s backed by Saudi Arabia is set to add to the regional deluge.
State-run Saudi Arabian Oil Co. is helping finance a $27 billion refinery and a petrochemical complex in Malaysia’s southern state of Johor.
The project, known as Refinery and Petrochemicals Integrated Development, or RAPID, will add a new stream of fuels near Asia’s main oil trading hub of Singapore at a time when China continues to unleash record amounts of diesel and gasoline onto the global market.
“The immediate impact from RAPID will lead to more Malaysian exports of diesel and jet fuel, while also reducing the need to import as much gasoline,” said Joe Willis, a senior research analyst for refining and oil products at Wood Mackenzie Ltd. in Singapore. “For middle distillates, Johor is conveniently located next to the Singapore storage hub.”
A renaissance in diesel, also known as gasoil, had underpinned oil’s rally into a bull market last year, and profits from making the fuel have rebounded to near their highest level since November 2014 on the back of healthy global economic growth.
Still, concern is growing that China’s unprecedented levels of exports as well as the additional shipments from Malaysia may weigh on Asian refiners’ margins.
The profit from turning crude into diesel, or the so-called gasoil crack, was at $16.27 a barrel at 3:28 p.m. in Singapore on Thursday, up from an average $12.24 last year, according to data from PVM Oil Associates.
The RAPID project, operated by Malaysia’s state-owned Petroliam Nasional Bhd, known as Petronas, is due to start operations in 2019 with 300,000 barrels a day of crude-processing capacity. That’s a massive increase for the Southeast Asian country, which has a total 660,000 barrels of daily capacity now, according to Willis.
Saudi Strategy
For Saudi Arabian Oil Co., known as Aramco, the project is part of its long-term strategy of investing in Asian refineries to lock in demand for its crude in the world’s biggest oil-consuming region amid a fight for global market share.
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