A Rapid white elephant in the making?

The RM60-billion oil refinery is meant to cater for China and India's market, but PKR warns that such a stratergy can prove to be a costly gamble.

PETALING JAYA: PKR warns that the RM60 billion Petronas Refinery and Petrochemical Integrated Development (Rapid) in Pengerang, Johor, may be a white elephant once it becomes operational in 2016.

Party trade and investment bureau head Wong Chen said this was because the refinery was export-driven and largely dependent on China and India’s demands.

Quoting Petronas downstream business vice-president Wan Zulkiflee’s statement in December 2011, Wong said the state-owned oil corporation had acknowledged difficulty in downstream-related businesses but was optimistic towards Rapid due to the robust growth in China and India.

However, he said poor economic sentiments had since emerged in the two countries, and an International Monetary Fund (IMF) report had cited a possible global economic crisis that might last for 10 years.

In addition, he said China and India had also embarked on their massive oil refineries and downstream projects.

“In tougher times, they will always favour domestic producers and boost utilisation of their own downstream facilities.

“In the meantime, Petronas’ Rapid will just be one of several regional players vying to supply these markets,” he told a press conference here today.

“If Petronas proceeds with its plans for Rapid, come 2016 when it becomes operational, the project may prove to be a gigantic white elephant,” he added.

Relocating to Kerteh

The corporate lawyer (photo below) noted that the downstream oil business, which included oil refinery and value-added industry, had become a tight-margined one due to soaring oil prices since 2002.

He questioned why Petronas was betting RM60 billion to invest in such a sector while major international oil companies such as Shell and Exxon adopted a wait-and-see approach.

“My friendly reminder to all the technocrats at Petronas is this: you are essentially custodians of the nation’s wealth. Thus, your master is the rakyat and not the prime minister. Do not make Rapid a mega project driven by his political wants,” he said.

Should Pakatan Rakyat win the federal leadership in the next general election, Wong said it might consider relocating the project to Kerteh, Terengganu, if it was proven viable.

He said a refinery in Kerteh made more financial sense as the area, spanning across 5,000 acres of land, already housed a Petroleum Industry Complex equipped with port facilities and infrastructures.

Wong said Pakatan would also scale down the project from 300,000 barrels per day (bpd) to 150,000 bpd to ensure tighter capacity to utilisation.

“There is a likelihood this project can be cancelled altogether due to environmental concerns, but if this is not the case, the least we can do is to extend the project evaluation timeline, revisit fundamental considerations and conduct a full community engagement,” he said.