The Petronas Decision: What It Means

Costoverruns

By John Richardson

LAST week’s decision by Petronas to go ahead with its $27bn refinery and petrochemicals complex at Pengerang in Johor, Malaysia, tells us that:

  • Nation building remains important in the petrochemicals business. This project will create huge further economic value for Malaysia through all the construction and operating jobs created and the revenues from the complex’s output, which will include differentiated chemicals and polymers.
  • We don’t necessarily live in a world that will, automatically, become more globalised. In fact, it could become less globalised. How then might the US place all of its surplus volumes?

What we also found intriguing about the announcement was that some 70,000 workers will be required during the construction phase of the project – the Pengerang Integrated Complex (PIC).

With the start-up of the refinery element of the complex due to take place in early 2019, this suggests that peak construction could fall in the same time frame as  some of the many US cracker and natural-gas projects (see the above chart which shows the expected surge in demand in the States for craft, or skilled, labour).

The cost and availability of construction workers and engineering and contracting resources, therefore, seems likely to be an issue.

But the real issue everyone should be worried about is demand…..

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