KUALA LUMPUR (July 30): Dialog Group Bhd (KL:DIALOG) said its associate Pengerang Terminals (Two) Sdn Bhd (PT2SB) is spending US$330 million (RM1.4 billion) to expand its storage capacity in the refinery town in Johor, after securing a 25-year storage and handling agreement for a joint venture involving Petronas, Eni SpA and Euglena Co Ltd.

PT2SB, which is 25%-owned by Dialog, will develop a storage capacity of 272,000 cbm dedicated to Pengerang Biorefinery Sdn Bhd (PBSB), Dialog said. A terminal use agreement (TUA) was signed between the two parties on July 29, it added.

The TUA is under a take-or-pay mechanism, and the total investment also covers costs associated with shared facilities at the terminal. Similar projects by Dialog in Pengerang have yielded internal rate of returns of up to low double digit percentages, according to past analyst reports.

The project, to be completed in the first half of 2028, “will benefit from efficiencies of current capacity and infrastructure of PT2SB” which includes its dedicated deep-water terminal serving the Pengerang Integrated Complex, said Dialog in a filing announcing the contract win.

“The expansion project reinforces Dialog’s midstream investments and supports development plans in Pengerang Deepwater Terminals (PDT),” said Dialog.

PDT, spanning a total land area of approximately 1,200 acres, now includes four terminals and three jetties, while the remaining approximately 700 acres of reclaimed and buffer land are reserved for future development.

Dialog said the move tallies with its strategy to generate recurring income, as well as to diversify vertically across the energy sector as well as in the green segment to weather different economic and oil price cycles.

“Dialog remains committed to developing Pengerang Deepwater Terminals into the largest petroleum and petrochemical hub in the Asia-Pacific region,” it said.

PBSB is a joint venture between Petronas Mobility Lestari Sdn Bhd (42.5%), Enilive SpA (42.5%) and Euglena Sustainable Investment Ltd (15%).

Petronas, Eni and Euglena achieved the final investment decision to construct a biorefinery in Malaysia last July, targeting to process 650,000 tonnes per year of raw materials to produce sustainable aviation fuel, renewable diesel or hydrogenated vegetable oil, and bio-naphtha.

Aside from Dialog, other shareholders of PT2SB are Petronas-linked PRPC Utilities and Facilities Sdn Bhd (40%), Vopak Terminal Pengerang BV (25%) and Johor state-owned Permodalan Darul Ta’zim Sdn Bhd (10%).

Dialog shares last traded unchanged at RM1.71, giving the storage tank operator a market capitalisation of RM9.65 billion. The counter is down 7.5% this year.