Petronas may want close association with Aramco, says expert

Exclusive report by Siti Radziah Hamzah

KUALA LUMPUR, Nov 7  -- Petroliam Nasional Bhd (Petronas) may want to be closely involved with Saudi Arabian oil giant, Saudi Aramco, which will supply much of the oil for its downstream investment, the Refinery and Petrochemical Integrated Development (RAPID) project in Johor. 

Asia School of Business assistant professor of management Dr Renato Lima de Oliveira said  Petronas and Saudi Aramco were important partners in the RAPID project, where both have a substantive investment in the downstream venture, which will process Saudi Arabian oil.  

RAPID is part of the Pengerang Integrated Complex in Johor.

Through collaboration in the RAPID project, Saudi Aramco will supply 50 per cent of the refinery’s crude feedstock requirements, with an option of increasing it to 70 per cent. 

"Having said that, the government regulations have just changed in Saudi Arabia, to make it more attractive to foreign investors. But, it may change again in the future, tilting in favor of higher taxation, while reducing the profitability of investing in Saudi Aramco," he told Bernama. 

Lima de Oliveira said there were still sizable risks considering the centralised decision structure of the Saudi government and fiscal needs.

Saudi Aramco has approached Petronas to participate in its initial public offering (IPO), as the oil giant is seeking cornerstone investors for the listing slated for December this year.

The Saudi government aims to sell 2.0 per cent of Aramco in its domestic listing in December. 

The approach comes at near the start of the commercial operations of RAPID, built jointly with Aramco.  

In early trade today, Petronas-related counters rose as it had piqued interest from local and foreign investors following its possible participation in Saudi Aramco's IPO. 

An analyst said Petronas' participation in the IPO would further cement ties between the oil and gas companies of both Malaysia and Saudi Arabiia.

It could also be a huge boost for Petronas as Saudi Aramco is one of the largest and most profitable company in the world. 

-- BERNAMA