Riyadh – Custodian of the Two Holy Shrine King Salman’s visit to Malaysia is a unique historic step between the two countries’ strategic relations.
Saudi Arabia’s state-owned oil company Aramco is set to invest $7 billion in Malaysia in a petrochemical project and refinery in south Malaysia.
Aramco is one of the most important oil companies in the world, which makes its international investments an additive value to many world economics.
Malaysia’s Prime Minister Najib Razak announced on Monday that Aramco will invest $7 billion into an oil refinery and petrochemical project in Malaysia’s southern state of Johor, according to Reuters.
During a press conference, Najib said the decision was made on Monday after discussions between top executives from Aramco and Malaysia’s state-owned energy company Petroliam Nasional Bhd (Petronas), the sponsor of the $27 billion Refinery and Petrochemical Integrated Development (RAPID) project.
“This is a significant investment and more details will be announced tomorrow. I just want to confirm that the agreement has been reached and King Salman is satisfied that the deal will be signed tomorrow,” Najib said.
Petronas and Saudi Aramco executives are scheduled to sign the agreement on Tuesday.
An industry source familiar with the matter says Aramco will buy a stake in RAPID’s refinery, cracker and petrochemical operations, according to Reuters.
Aramco will also supply at least 50 percent of the crude that will be processed at RAPID, with an option to increase the supply, the source added.
Oil and gas analyst with consultants Frost & Sullivan based in Kuala Lumpur Subramanya Bettadapura said that Aramco funding will help move RAPID to fruition and the desire of Saudi and Malaysian leaders to maintain close links between the countries likely helped cement a deal.
“This investment confirmation would help bring the RAPID project to the commissioning stage,” said Subramanya.
The RAPID project is expected to begin operations in the first quarter of 2019. It will contain a 300,000 barrel-per-day oil refinery and a petrochemical complex with a production capacity of 7.7 million metric tons and the complex will sit alongside an existing oil storage site at Pengerang.
In 2016, total trade between the two countries was at $3.15 billion, an increase of 28% from the year before.
Malaysia also has a strong presence in Saudi Arabia’s construction sector, with 19 contracts worth $4 billion awarded to Malaysian companies.