Merapoh in US$10b refinery venture

Privately-held Merapoh Resources Corp Sdn Bhd has roped in two private Chinese companies to invest US$10 billion (RM36 billion) in a refinery project that will include Chinese state oil company China National Petroleum Co (CNPC).

Hong Kong Beijing Star Ltd and Winson Investment Ltd will invest US$5 billion (RM18 billion) each to build the refinery in Yan, Kedah.

The two investors signed a memorandum of agreement with Merapoh and the Kedah state government in Kuala Lumpur yesterday.

Merapoh executive chairman Md Nazri Ramli said it will invite other local and foreign investors to take up stakes in the project.

Construction is scheduled to start next month.

Hong Kong Beijing Star and Winson will hold 40 per cent stake each, with Merapoh owning the rest.

"Local and international financial institutions will become investors and equity partners of the project," Md Nazri told reporters after the signing.

Work on the two-train refinery, which involves reclaiming 340ha offshore, will take five years, with commissioning expected by end-2013 or early 2014.

The refinery will be able to process 350,000 barrels of oil per day (bpd).

Merapoh has hired SK Group of Companies to build the refinery in the Sungai Limau Hydrocarbon Hub.

SK Group is South Korea's third largest industrial group. Its unit SK Energy will also operate the refinery.

To comply with government rules, 30 per cent of works, such as building tank farms and pipe-laying, will be awarded to local contractors, Md Nazri said.

"We will build a 20km pipeline going towards offshore Kedah for offloading of crude oil and loading of refined oil. The refined products will be ferried, using tankers, to consumers in East Asia, particularly China," he said.

Under the project, Merapoh will import crude oil from the Middle East, process the crude into refined products and export them to China and other Asian nations.

Merapoh has tied up with CNPC under a 20-year deal in which the Chinese oil company will buy the bulk of the plant's output and market the rest.

"Some 200,000 bpd of refined oil will be allocated specifically to CNPC for them to market in China, while the remaining 150,000 will be sold on the open market."

Saudi Aramco will supply crude oil to Merapoh under an in-principle deal.

"We expect to sign a deal in the next one or two months.

"We may also rope in suppliers from the other Middle East countries, probably Iran," Md Nazri said.