KUALA LUMPUR: State oil company Petroliam Nasional Bhd (Petronas) will start up the refinery within its US$19 billion (RM61.4 billion) refinery and petrochemicals integrated development (Rapid) project in Pengerang, Johor, at end-2017, the company told Reuters yesterday, signalling a further delay in the country’s largest ever infrastructure project.

A delay to the project could deal a blow to local oil and gas services firms hoping for work on the massive project. A source familiar with Petronas’ business strategy told Reuters the project had been complicated by a need to secure water supplies as well as cater for proposed international partners.

Petronas had already put back the project from late 2016 to early 2017 in June and revised the final investment decision (FID) to the first quarter next year, citing state government problems in relocating villages and graves from the 2,000ha site.

“As a result of the revised FID date, the Rapid refinery is scheduled to be ready for start-up in the fourth quarter of 2017 and the remaining plants within the complex are scheduled to be commissioned in 2018,” Petronas said in a statement to Reuters yesterday.

This is about six months later than market expectations after local media cited Petronas CEO Shamsul Azhar Abbas in June as saying the start date for phase one of the Rapid project had been pushed back to early 2017.

Delays in the project — a cornerstone of Prime Minister Datuk Seri Najib Razak’s Economic Transformation Programme aimed at doubling Malaysians’ incomes by 2020 — could slow an economy whose oil and gas sector makes up a fifth of GDP.

The complex is the largest single investment in Malaysia, and aims to grab a chunk of the US$400 billion global market for speciality chemicals used in products from LCD televisions to diapers.

Its location at the southernmost tip of the peninsula, just 10km from Singapore’s east coast, is part of a vision for a “Greater Singapore” energy trading hub that would rival competitors such as China.

“This massive project is getting more complicated as we move forward,” said the source, who declined to be named as he was not authorised to speak to the media.

“We will need to spend to secure the water supply and now parts of the project may need to be redesigned to cater for incoming project partners,” he said.

Petronas has signed heads of agreements with Italy’s Versalis SpA, Japan’s Itochu and Bangkok-listed PTT Global Chemical to build speciality chemical plants.

Germany’s Evonik also stepped into the project after rival BASF — the world’s top chemicals group — pulled out after differences in business strategy.

This article first appeared in The Edge Financial Daily, on July 31, 2013.