KUALA LUMPUR • Saudi oil giant Aramco is buying an equity stake in Petronas' major refining and petrochemicals project in the southern Malaysian state of Johor, investing a total of US$7 billion (S$9.8 billion).
The firms, in a joint statement, said Aramco will take a 50 per cent stake in select ventures and assets in the Refinery and Petrochemical Integrated Development (Rapid) project, which is developed by Malaysian state-controlled Petroliam Nasional Berhad, also known as Petronas.
The project is located in Pen- gerang town, about 110km from Johor Baru and to the north-east of Pulau Tekong.
Officials in Malaysia have said previously that the project aims to ride on the spillover of Singapore's position as an international oil and gas trading hub.
The deal signing was formally witnessed by Malaysian Prime Minister Najib Razak and Saudi King Salman Abdulaziz Al Saud.
Petronas chief executive officer Wan Zulkiflee Wan Ariffin told reporters Aramco will take a 50 per cent stake in Rapid's refinery and cracker project.
"Malaysia offers tremendous growth opportunities and today's agreement further strengthens Saudi Aramco's position as the leading supplier of petroleum feedstock to Malaysia and South-east Asia," Aramco CEO Amin Nasser said.
"With Rapid's strategic location in a prolific hub, it would also serve to enhance energy security in the Asia-Pacific region."
The move comes as Saudi Arabia seeks to defend its status as the world's biggest exporter and fend off rivals in Asia, the biggest market for its crude.
The deal will also boost Aramco's downstream business ahead of a planned initial public offering next year, and also bolsters Malaysia's national oil firm Petronas after it cut spending because of the slump in oil prices.
Rapid will contain a 300,000 barrel-per-day oil refinery and a petrochemical complex with a production capacity of 7.7 million metric tonnes.
It is expected to go online in the first quarter of 2019.
The facility is planned as part of the Malaysian government's ambitious Pengerang Integrated Petroleum Complex, which will include Rapid and oil storage facilities.
"Saudi Arabia, as Opec's largest producer and exporter, wants to secure outlets in the world's most dynamic and fastest-growing energy market," said Mr John Driscoll, chief strategist at JTD Energy Services, who has spent more than 30 years in the petroleum trading industry in Singapore.
"A US$7 billion deal positions the kingdom as Malaysia's largest single investor and provides the basis for future partnerships and collaboration," added Mr Driscoll.