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Tuesday, March 28, 2017

Rafizi: Is Petronas buying more expensive crude oil from Aramco?



Pandan lawmaker Rafizi Ramli wants to know whether Minister in the Prime Minister's Department Abdul Rahman Dahlan’s intervention in the US$7 billion deal between Petronas and Saudi Aramco had led to the former paying for more expensive crude oil from the latter.
In a press conference in Parliament today, the Pandan lawmaker cited media reports on Saudi Aramco purportedly giving up plans to ink the deal due to the belief that the project would not generate sufficient revenues.
“This means that one of the main reasons why there was no agreement between Petronas and Saudi Aramco before the intervention of (prime minister) Najib (Abdul Razak) and Abdul Rahman was due to investment returns rate determined by Saudi Aramco which Petronas did not agree with," he said.
The deal, Rafizi pointed out, involved Saudi Aramco’s agreement to supply crude oil which is the main substance to be processed at Petronas’ Refinery and Petrochemical Integrated Development (Rapid) complex in Pengerang, Johor.
This means that Petronas had agreed to purchase crude oil from Saudi Aramco in the long run for a price whose formula was determined earlier according to the fluctuation rate of global crude oil, added Rafizi.
“Usually crude oil that is purchased from long-term agreements like this involves discounts on certain rates reduced from the reference rate of Brent crude oil.
“When Abdul Rahman claimed that he had saved the deal, there’s a possibility that Saudi Aramco managed to obtain Petronas’ agreement to buy crude oil according to the price insisted upon by Saudi Aramco.”
Such a large-scale project like Rapid’s would mean that Petronas would have to pay billions of ringgit every year even if it involves the difference of US$1 per barrel.
“I want Abdul Rahman to answer these questions - how much and what was the crude oil formula used that Petronas needs to pay to Saudi Aramco and how is it different before his and Najib’s intervention.
“What was his role in negotiating the deal that a project which was previously believed would not generate sufficient revenue suddenly fulfilled Saudi Aramco’s investment criteria?”
Abdul Rahman, last week, said he was “at the right place and the right time” when the US$7 billion deal with Saudi Aramco did not progress as expected.
He said the prime minister had ordered him to Riyadh at the end of 2016, after negotiations for the deal, which had gone on for around two years, were progressing very slowly.
Najib previously claimed Saudi Aramco's plan to invest in the project almost fell apart due to “misinformation” about Malaysia.
Among the claims he said was that Malaysia was a risky economy and that the Employees Provident Fund (EPF) was on the verge of bankruptcy.
The deal was finally inked on Feb 28, during King Salman Abdulaziz Al Saud's visit to Malaysia.- Mkini

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