Petronas Awards Group III Contract


Malaysias Petronas on Monday offered its first official confirmation of plans to build a Group III base oil plant, announcing the awarding of a contract for engineering, procurement, construction and commissioning.

Formally named Petroliam Nasional Bhd., the company until now has declined to discuss or confirm the existence of the project, even after Foster Wheeler and ExxonMobil announced in 2004 that they had received contracts for it – for consulting and process technology, respectively.

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On Tuesday officials explained that the company had wanted to avoid repeating past incidents in which it announced plans that did not come to fruition. In the 1990s, it said it intended to build a Group I base oil plant with Taiwans Chinese Petroleum Corp., but it never did. Approximately four years ago, Petronas disclosed plans to build a Group II plant with U.S.-based ConocoPhillips. In addition, it was linked a few years ago to reports that SK Corp. was pursuing a joint venture outside of its native South Korea.

Our earlier reluctance to discuss this project was due to our failure in the past to fulfill other announcements, Ong Eng Kiang, a product development specialist in Petronas Lubricant Business Division, told Lube Report yesterday. We were concerned about losing credibility after the previous announcements went unrealized, so the company became very guarded. But now that we have reached the stage of awarding this contract, there is no question that this project will be completed.

The base oil plant, Petronas first, will be built at the companys refinery complex in Melaka. Consistent with previous announcements, the company said it will have capacity to make 6,500 barrels per day. Its stated start-up date of mid-2008 is a year later than the schedule mentioned by Foster Wheeler.

Officials said the refinery produces a large volume of hydrocracker bottoms that will be used as feedstock for the base oil plant. They added that Petronas will use some of the product from the plant to make its own lubricants and will sell the rest to other blenders.

The contract went to a consortium of four companies: German engineering firm Lurgi AG; Indian engineering and construction firm Larsen and Toubro Ltd.; affiliate L&T-ECC Construction; and industrial equipment maker Kejuruteraan QKS Sdn. Petronas did not disclose the value of the contract.

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