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Petronas-Saudi Aramco deal still murky
FocusM team | 09 Feb 2018 00:30
News that Saudi Arabian Oil Company (Saudi Aramco) and Petroliam Nasional Bhd (Petronas) are close to raising a US$8 bil (RM31.4 bil) loan for the latter’s Refinery & Petrochemical Integrated Development (Rapid) project in Johor raises more questions about the partnership.

How much exactly is the Saudi oil giant investing in the Petronas project? One year after the Saudi Aramco-Petronas joint venture was announced, the deal is still murky.

On Feb 28 last year, the national oil company announced it had signed a share purchase agreement (SPA) allowing Saudi Aramco’s equity participation in the project. The signing ceremony was held in conjunction with the state visit of the Saudi kingdom’s King Salman to Malaysia.

Petronas said the partners will hold equal ownership in selected ventures and assets of the US$27 bil Rapid project within the Pengerang Integrated Complex (PIC), which is slated to start operations early next year, but offered little details about the deal.

While taking out a joint loan on such a big project is not unusual, the public is still left in the dark on the extent of Saudi Aramco’s funding in the deal. Petronas has not officially revealed any information or figures on the loan or investment arrangement, and neither has Saudi Aramco.

But Prime Minister Datuk Seri Najib Razak himself announced after the signing that Saudi Aramco would be investing US$7 bil in the project. How much of that will be raised by the Saudis through the joint loan with Petronas is now up in the air.

If it turns out that Saudi Aramco will be funding less than the US$7 bil initially expected, it may affect its proposed equity in the project.

Saudi Aramco’s investment in Rapid has been dogged by controversy from the start. It had been courted as a major investor but had stalled on a decision for two years. It was said the Saudi national petroleum and natural gas company was dithering over the viability of Rapid.

When it finally decided to greenlight the partnership last year, it was hailed by the Malaysian government as a major foreign investment triumph. But is it really?

If Petronas is taking up the bulk of the loan and Saudi Aramco is pouring in much less than expected, it might be perceived that Malaysia is getting the raw end of the deal.

If it is truly a win-win partnership for both countries, it should not be shrouded in so much secrecy. Details of the investment and financing should be made public. 

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