Saudi Aramco has shelved plans for a partnership with Malaysian state-oil firm Petroliam Nasional Berhad in a US$27 billion (S$38.29 billion) refining and petrochemical project in the southeast Asian country, industry sources familiar with the matter told Reuters on Wednesday.
Aramco had been in talks with Petronas about a joint venture in the Refinery and Petrochemical Integrated Development (RAPID) project in the southern Malaysian state of Johor.
Aramco and Petronas officials did not respond immediately to requests for comment. "I believe the proposal was still in an initial discussion phase," said Sadad al-Husseini a former senior executive at Saudi Aramco and now an energy consultant.
"In any case, considering the scale of the investment, China's growing regional exports of refined products, Singapore's existing refining capacity and the competition this project would have created to Aramco's own JV refineries in Korea, China and Japan, its deferral was probably a very well considered and prudent Aramco management decision at this time."
The RAPID project, launched in 2012 and expected to begin operations in the first quarter of 2019, is designed to have a 300,000-barrel-per-day oil refinery and a petrochemical complex with a production capacity of 7.7 million metric tonnes.
Petronas last year sought proposals for a US$7.2 billion loan for the project, with separate guarantees from the company and Aramco, Thomson Reuters IFR reported in June.
Aramco's move to suspend plans for the Malaysian venture comes at a time when Petronas is struggling with the slump in oil prices.
In early 2016 Petronas said it would cut spending by up to 50 billion ringgit (S$16 billion) over the next four years. It has also slashed the dividend it pays to the Malaysian government.
Petronas also has yet to make a final investment decision on a controversial US$27 billion liquefied natural gas project in Canada that has come criticism from aboriginal and environmental groups.