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Wednesday, July 31, 2013

Malaysian O&G - RAPID delayed again (HwangDBS)

According to Reuters, PETRONAS will delay its RM60bn Refinery and Petrochemical Integrated
Development (RAPID) in Pengerang with commissioning expected in 2018 (vs 2016 initially). This is the
second time that PETRONAS pushed back the start-up of RAPID due to issues with the water supply as well as relocation of existing villages and graves in Pengerang.

The RAPID refinery is now scheduled to be ready for start-up in 4Q17 while the remaining plants within the
development will be commissioned in 2018. PETRONAS has so far roped in Italy’s Versalis, Japan’s Itochu,
Thailand’s PTT Global Chemical to participate in RAPID. Meanwhile, Taiwan’s Chinese Petroleum Corp was reported to have scrapped its investment plan in Pengerang, citing the radical change in the industrial
structure of naphtha cracking.

The delay is not totally unexpected given the complications of this massive project. However, it is likely to
have a negative impact on the local O&G players as the project was expected to create massive spill-over
effects with the various jobs to be awarded. Dialog (Hold, RM3.20 TP) is currently the existing player with
exposure to Pengerang by virtue of its deepwater independent terminal. The first phase is set to be
operational by 1Q14 but we believe that the second phase may be delayed as well as the tank capacity
was dedicated for the RAPID project.

Petronas Chemicals’ (Hold, RM6.15 TP) growth prospects could be affected as it is likely to play a
substantial role in the petrochemical projects. Meanwhile, other players such as MMHE (Hold, RM3.30 TP), SapuraKencana (Buy, RM4.85 TP), Pantech (Not rated) and Muhibbah (Buy, RM3.10 TP) may have to wait a little longer before PETRONAS starts to dish out contracts.

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