Sunday, November 16, 2008

Tan Sri Mohd Hassan Marican : Petronas explains

Kuala Lumpur: The plan to set up a petrochemical industry in Sabah was not an afterthought or sudden but the result of a detailed study since 2006 and one in which the State Government was fully involved.

Stressing this in an exclusive interview, Petronas President-cum-Chief Executive Officer Tan Sri Mohd Hassan Marican said making public the plans beforehand would have alerted competitors and placed Malaysia at a disadvantage.

"This (petrochemical plant project) is not new and has been ongoing.

"People always criticise Petronas. They say we keep things quiet. But in this industry this is how we do it," he said, to suggestions by certain quarters that the State Government was not seen as playing an active part.

"We have been very quiet about this also because we don't want speculation about tanah (land), etc. Together with (Chief Minister) Datuk Seri Musa, we even discussed it with the national leaders, both the Number One and Number Two," he said.

"The first discussion I had with the State Government was in 2006 where the whole concept was discussed. At that discussion we also said we will embark on a master plan for downstream gas industries, which will include petrochemicals."

Marican also said some Sabah leaders who have been agitating for the gas to be landed wholly in Kimanis and for a new Liquefied Natural Gas (LNG) plant to be built would be disappointed to learn that the gas deposits off Sabah are the lowest in the nation, only 10-12 trillion cubic feet.

He said besides being small, Sabah's gas deposits are also scattered which makes it expensive to develop, unlike Sarawak's and peninsula's huge 45 trillion cu ft and 39 trillion cu ft, respectively.

"This (setting up a LNG plant in Sabah) was considered but found not viable. In the end, if you look at in the national context, we will be wasting resources because we already have a (LNG) complex in Bintulu."

The Bintulu complex is the world's largest LNG Complex producing 23 million tonnes of liquefied gas per year.

The Bintulu plant took 30 years to develop while Kertih 25 years, he said.

Kertih's overall investment alone was RM70 billion.

Marican said the cost of building a LNG plant today was not cheap, about US1,200 per tonne. The third plant in Bintulu which was completed in 2002 cost US200 per tonne to set up.

Then there is the question of infrastructure which is huge as otherwise the world class companies won't be interested to come. "All the facilities we have built are world scale capacities because this is a global business," he said. Marican said in this industry, the ability to bring in big players is crucial and they are not interested in deposits that won't be able to sustain production for a minimum of 20 years, which is the industry's benchmark.

Hence, the only practical approach to developing the gas was to send some to Bintulu and use the rest to support downstream gases at the planned petrochemical plant in Kimanis. He said the development of Sabah's offshore gas will be undertaken in two clusters, which would gather the gas from the various reservoirs before being piped to Kimanis.

He said oil that would be extracted from the Gumusut field would also be landed in Kimanis prior to export, which is why the whole set-up has been labelled as the Sabah Oil and Gas Terminal (SOGT).

Besides, if the gas is to be commercially viable, there would have to be a Base Load. "Only when you have this Base Load can downstream gas industries proceed."

He believed part of the misunderstanding over the issue could be due to politicians and others oversimplifying the matter as just "petrochemicals" without knowing that the gas would have to be broken down to four parts - Methane, Ethane, Propane and Butane - before their appropriate industrial use.

He said the other misperception is that the gas all belongs to Petronas, when in fact it belongs to the Production Sharing Contractors (PSCs), including Petronas, and who will only develop them if there are economic returns.

Nevertheless, Marican said that Sabah stands to gain quite a substantial amount from gas royalty.

"But if we don't go ahead and develop this, there'll be no royalty," he said.

On another issue, Marican noted that some quarters had placed high expectations on the oil and gas industry as "a provider of employment".

"This is not correct. The industry is one of highly skilled, highly technical but small in number (once the construction stage is over and the operational stage begins)."

Marican declined to comment when asked if the State Government should then seek a better deal from the gas through a separate higher gas royalty.

On the contention by some Sabah politicians that the gas belongs to Sabah, he said "it is a national resource" and should not be looked at from a parochial point of view.

Instead, he said the focus should be on how Sabahans can gain from the supporting industries.

He said there would be ample opportunities in the supporting industries and cited the Sarawak service providers who have been very focussed, been able to look at the long term and even export their services.

He said Petronas had elaborated on the many opportunities in this regard in its dialogues with the various trade chambers.

"If the expectation is for all these things to happen overnight, I'm sorry it will not and cannot," he said.

As for the 300MW combined cycle gas plant, Marican said this would be ready by the time the gas is landed on Kimanis in 2011. There is a joint committee involving the State Secretary to monitor the developments.

Petronas explains
Daily Express, Malaysia