This article first appeared in The Edge Malaysia Weekly on November 10, 2025 - November 16, 2025

A proposed downstream petrochemicals facility to be developed by Singapore-based ChemOne Group in Pengerang, Johor, is experiencing a setback in achieving financial close, sources say, due to potential cost escalation on the part of its construction partner.

The US$5.32 billion (RM22.3 billion) project is considered one of the handful of major investments in the Pengerang Integrated Petroleum Complex (PIPC), Malaysia’s largest petrochemicals hub.

The integrated condensate splitter and aromatics facility, dubbed Pengerang Energy Complex (PEC), is envisioned to produce 2.5 million tonnes of aromatics, 3.9 million tonnes of petroleum and 50,000 tonnes of hydrogen a year. Aromatics is a type of speciality petrochemical used to enhance the scent and flavour in the food and beverage industry as well as other sectors, such as fragrance, detergents and cosmetics.

PEC’s project owner and operator Pengerang Energy Complex Sdn Bhd, in which ChemOne holds an indirect stake, last year secured an agreement for US$3.5 billion in project financing from export credit agencies (ECAs) in the US, Europe and Asia, as well as development banks in the Middle East.

However, an upward revision of the engineering, procurement and construction (EPC) costs from the initial US$2.5 billion by its EPC partner, Italy-based Maire SpA, has resulted in the project being unable to achieve financial close, the sources say. Maire undertakes plant engineering through its unit Tecnimont SpA.

ChemOne is understood to be exploring other EPC contractors, although this could affect the project financing, considering as much as US$1.16 billion is provided by the Italian Export Credit Agency (SACE), one of the sources says.

When contacted by The Edge for comments on the EPC’s upward cost revision and the status of SACE’s portion of the financing, ChemOne says in an email: “We appreciate your interest in the project. At present, we do not have any updates to share beyond what has been publicly announced.”

Italy-listed Maire had not responded to The Edge’s request for comment at press time.

Among potential parties being explored by ChemOne are those from China, a source says, although this remains conjecture. Just last month, Bloomberg, quoting sources, reported that ChemOne was seeking a US$600 million private credit loan to support the PEC’s construction and that it had attracted South Korean investors.

One of the ECAs is the Export-Import Bank of the US (US EXIM). US-based Honeywell UOP LLC is the project’s main technology provider, while Chevron Corp is both a feedstock supplier and product offtaker, alongside Norwegian energy firm Equinor ASA. Other offtakers include Thailand-based PTT and Japan-based Mitsui & Co, according to reports. The project will tap Dialog Group Bhd’s ­(KL:DIALOG) Pengerang Deepwater Terminals for marine facilities and onshore tank storage.

The problem comes at a time when the global petrochemicals and oil refining industry is still grappling with persistent capacity oversupply post-pandemic.

The downturn, which has affected even the biggest players including Petronas Chemicals Group Bhd (KL:PCHEM) at home, has prompted wide-ranging overhauls in key producing countries like China and South Korea in recent months.

Measures to stabilise the market by the two countries include phasing out smaller facilities, upgrading outdated operations, and refocusing on the less crowded speciality chemicals segment. The downturn is expected to bottom out in the coming year and the market is projected to improve to more sustainable levels by 2028, according to industry watchers. Before the financing problem, ChemOne’s PEC was targeted to begin construction this year. The latest start-up date is 1Q2029, according to ChemOne’s official website, just in time to capture the sector recovery.

For now, PIPC’s main project remains Petroliam Nasional Bhd’s biggest downstream investment to date, the US$27 billion Pengerang Integrated Complex, which includes a 300,000 barrels-per-day crude refinery complex, a steam cracker complex and a petrochemical facility.

Separately, ChemOne also has plans to develop the Pengerang Renewable Complex to produce sustainable aviation fuels, hydrotreated vegetable oil and bio-naphtha. The plant is envisioned to utilise the hydrogen by-product produced in PEC.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.