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“Oil, gas and energy are an essential driving force for any modern economy. Under the astute management of PETRONAS, the domestic oil and gas industry has played a crucial role in the growth of the Malaysian economy. However, after decades of oil and gas production, our domestic resources will inevitably start to deplete. To prepare for this, we will strengthen other value creating activities in the oil and gas value chain and ensure that we have a sustainable energy platform for the future. To this end, the Government will develop Malaysia into a leading oil and gas services hub in Asia, grow Malaysia’s role in oil storage, logistics and trading and import LNG to serve latent gas demand and attract new-gas based industries. At the same time we will ensure that we develop an energy efficient, diversified and sustainable energy mix to power our future.”

YAB Dato’ Seri Mohd. Najib Tun Abdul Razak

Oil and gas production have been a mainstay of Malaysia’s growth since oil was first drilled in 1910 in Miri, Sarawak. The founding of PETRONAS in 1974 provided vital momentum to the development of oil and gas resources in Malaysia.

Oil and gas industry through its upstream and downstream activities is a significant contributor to economic growth. In 2009, the sector contributed a total of RM68.3 billion or 13.1% of GDP, of which upstream activities including petroleum and gas represented RM39.5 billion or 7.6% of GDP and downstream activities including the petrochemical industry contributed RM28.8 billion or 5.5% of GDP. Given the rise in global energy demand and economic growth, the contribution from oil and gas industry is expected to increase by approximately 20% over the next 5 years to reach RM81.9 billion or 11.1% of GDP in 2015. Upstream is expected to contribute RM43.0 billion or 5.8% of GDP whereas downstream is expected to contribute RM39.8 billion or 5.3% of GDP in 2015[1].

There are a number of business opportunities in the oil, gas and energy sector, which together with the baseline sector growth will provide RM61.2 billion of GNI contribution by 2020. This amount includes a RM32.0 billion increase in GNI versus the 2009 baseline GNI due to expected increases in the oil price, given relatively low oil prices in 2009[2].

The oil and gas industry is generally divided into upstream, midstream and downstream activities.

Upstream activities consist of exploration, development and production of oil and gas resources.

Midstream and downstream activities range from the transportation of oil and gas, to refining and processing through to marketing and trading of end products.

The Oil, Gas and Energy NKEA is targeting 5 percent annual growth for the sector in the decade from 2010 to 2020. This is indeed an ambitious goal, particularly against a backdrop of the natural 2 percent decline of oil and gas production. This target translates into an increase of RM131.4 billion in the period from 2010 to 2020. Beyond economic growth in this decade, the oil gas and energy sectors are also responsible for building a sustainable energy platform for the rakyat and business, in this decade and into the future[3].

Petrochemical industries encountered important economic challenges.

Globalization resulted in a large market with severe competition between the producers.

Market fluctuation and high price of raw materials and energy are considered as additional problems.

The limitation of flexibility in terms of re-processing of the products and by-product distribution along with strict environmental regulations are other important challenges.

Stand-alone petrochemical plants and refineries reveal limited flexibility for product re-processing and by-product distribution. The inter-relation of petrochemical-refining plant has been of interest since earlier times and many petrochemical plants have been constructed adjacent to refineries to use their by-products. To improve the refining margins, the strategy is to integrate refinery and petrochemical plants so that to produce high price petrochemical feedstock (such as propylene and aromatics). In general, in Asia, part of refinery capacity has been devoted to petrochemical feedstock and fuel as by-product[4].

The aim of integration of refiners is upgrading of their by products, reducing the operating cost and increasing the benefit and the main objective of petrochemical producers is to upgrade the feed quality and feed availability, decreasing the operating cost and increasing the benefits[5].

Product streams in refineries have been traditionally oriented to produce the transportation fuels that they could be processed to produce aromatics and valuable chemicals.

In this way better margins or more products are obtained. This would be considered as another benefit of integration.

Traditionally, refineries have been mostly involved in fractionation, conversion and blending of petroleum cuts. The refining industry has its own challenges. Regarding the ever-increasing use of heavy oils, new catalysts and processes will be necessary, while expected that in the future the products will be characterized in terms of molecular properties rather than measuring bulk properties or behaviour parameters such as octane and cetane numbers, et cetera. Also the carbon to hydrogen ratio will be higher than the present value due to the removal of aromatics and olefins[6].

Petronas, the national oil corporation, plays a major role in driving the industry growth through its development of oil and gas resources as well as creation of opportunities for local companies to build up their capacity and capability across the value chain.

In the downstream segment, three major integrated petrochemical zones have been established and attracted foreign investments mainly from USA (33.0% of total foreign investments), Germany (22.8%) and Japan (14%); while having Petronas as the main domestic investor[7].

During 10th Malaysia Plan period, the investment target in petrochemical industry has been set at RM11.3 billion annually and exports from this industry are expected to reach RM27.7 billion in 2015.

To drive growth further, Malaysia will accelerate and optimise the development of remaining domestic reserves and existing infrastructure as well as support the formation of regional and global champions in contiguous business sectors.

Source : BERNAMA, The Star

-SNASH-(this article written for 1BINA.my)

[1] 10th Malaysia Plan (2011 – 2015)

[2] ETP: a Roadmap for Malaysia

[3] Chapter 6, Powering the Malaysian Economy with Oil, Gas and Energy, ETP: a Roadmap for Malaysia

[4] Nasr, M. R. Jafari, Sahebdelfar, Saeed, Ravanchi, Maryam Takht and Beshelli, Majid Daftari ; Integration of Petrochemical and Refinery Plants as an Approach to Compete in Hydrocarbon Market

[5] C. Haelsig, J. Taubman, A. Goelzer, C. Crawford, Added Value by Integrating Refining and Petrochemicals Operations, European Refining Technology Conference, London, United Kingdom, 1997.

[6] M. M. Ramírez-Corredores, Catalysis: New Concepts and New Materials, 16th World Petroleum Congress, Calgary, Canada, 2000.

[7] 10th Malaysia Plan (2011 – 2015)