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‎Johor

Petroleum Development Corporation – Mohd Yazid Ja’afar, CEO – Malaysia

26.01.2015 / Energyboardroom

Mohd Yazid Ja’afar, Chief Executive of the Johor Petroleum Development Corporation (JPDC), highlights the JPDC’s efforts to stretch the nation’s petrodollar via adding on local downstream capacity, details on the Pengerang Integrated Petroleum Complex, and information on the project schedule of PETRONAS’s Pengerang Integrated Complex.

Can you explain the vision behind the creation of Johor Petroleum Development Corporation Berhad (JPDC)?

JPDC was formed in April 2012 as a federal agency and a wholly-owned subsidiary of Malaysia Petroleum Resources Corporation (MPRC). Our vision is to transform Johor into a sustainable, world-class downstream oil and gas hub, in line with the Government’s Economic Transformation Program (ETP). JPDC’s main role is to coordinate the development of Pengerang Integrated Petroleum Complex (PIPC), facilitate entry of viable investments into PIPC, as well as enhance local community’s participation in the development. PIPC has been deemed a national project of strategic importance. To date, two major catalytic projects have started in PIPC, namely PETRONAS’ Pengerang Integrated Complex (PIC) that will feature integrated refinery and petrochemical facilities with supporting services, as well as Pengerang Terminal, a facility that will be able to handle the storage, blending and distribution of crude oil, gas and petroleum products, currently being developed by DIALOG Group Berhad and its partners, which include Royal Vopak of the Netherlands, the State Secretary, Incorporated (Johor) and PETRONAS.

What made Johor the right choice as a world-class downstream oil and gas hub?

Location, location, location! Johor and more specifically Pengerang are hidden treasures for the moment. Situated at the tip of the Southeast of Johor, Pengerang is located along major international shipping lanes and is the only location in peninsular Malaysia that can accommodate very large crude carriers (VLCCs). Pengerang’s proximity to Singapore, an already established hub, also serves as an advantage since Johor can match and in some instances exceed Singapore.

In April of this year, Pengerang Terminal began operations. What has been the impact thus far to the opening of this first major downstream project within Johor?

It is exciting times indeed, as the plans we presented on paper years ago are now becoming reality. Pengerang Terminal’s operations began in April 2014. As of October 31, 70 vessels had called at the terminal, and VLCCs and ULCCs will begin calling by Q1 of next year once the terminal’s crude oil tanks are fully complete.

Within PIPC, the $25.5 billion PETRONAS Pengerang Integrated Complex (PIC) Project was initially set to start in late 2016 but is now slated for 2019. How are going to ensure that the project does not fall further behind schedule and that you meet your stated objective “to transform Johor into sustainable, world-class downstream oil and gas hub”?

There is no doubt that the PETRONAS PIC project is a massive undertaking that will occupy 25km2 and requiring a construction period of close to 50 months. However, once PETRONAS made its final investment decision in April 2014, the project proceeded in full steam. We are confident that the 2019 deadline is achievable, with commissioning scheduled for early 2019 and operations slated to begin before year end 2019. JPDC’s priority is to assist PETRONAS in delivering the project.. Furthermore, the project has been split into two parts to increase efficiencies. The core project including the refinery, the cracker and the downstream industry account for a $15.2 billion investment, while the remaining $10.3 billion has been earmarked for associated facilities, such as a jetty, power and water supply.

In August, all the contract winners announced for PETRONAS PIC EPCC were large foreign companies. How do you see small and medium sized Malaysian companies as benefiting from the developments in Johor?

With a project as massive as PETRONAS PIC, substantial capital outlay and advanced technology requirements are required, particularly for the massive EPCC contracts. Not many Malaysian companies have access to either these large amounts of capital or this technological expertise. However, PETRONAS and industry partners have made the EPCC contract award winners take on local partners as part of their project development team, thus ensuring technology transfer and opportunities for local players. Furthermore, industry organizations such as Malaysian Offshore Contractors Association (MOCA) and Malaysian Oil & Gas Services Council (MOGSC) also foster Malaysian SMEs increased participation into oil and gas projects in Johor. MPRC is examining financial support opportunities to enable SMEs to obtain financing support, one of the key challenges faced by local SMEs in bidding for PETRONAS PIC contracts. We expect and welcome more Malaysian SME involvement in PIPC in the years to come.

Your mandate also includes promoting and marketing Johor’s downstream oil and gas industry to potential investors. What is your pitch to attract international investors to Johor rather than other regional destinations?

Johor State offers attractive ingredients to investors. While PIPC in Pengerang focuses on downstream oil and gas industry, we have a growing neighbouring economic development region, Iskandar Malaysia, which is also in Johor and offering growth opportunities in nine sectors, namely electrical & electronics, petrochemicals and oleochemicals, food & agro-processing, tourism, healthcare, education, logistics, creative industries and financial services. We offer investors with the opportunity to be part of Johor’s growth journey. By participating in PIPC, an investor would have a pivotal role in shaping an industry hub.

The Greater Johor area aspires to become Asia’s ARA. In this sense, how are Singapore and Johor complimentary destinations rather than competitors?

Both Johor and Singapore possess strategic attributes thanks to their location along trading routes and their proximity to demand zones in Asia, and which each zone compliments the strengths and challenges of the other. Whereas Singapore is limited in terms of space, Johor is limited in terms of supporting services. Singapore is the world’s largest bunkering fuel destination and boasts a ready ecosystem with mature finance, insurance and arbitration capacities, whereas the Greater Johor region is starting to build a service industry from scratch with strong government backing. Singapore focuses on the higher end of the petrochemicals value chain, which Johor complements by bringing the middle-end offering. Furthermore, Singapore and Johor together act as a gateway to the larger Asian region, especially given the ASEAN Economic Community’s launch in 2015. When Singapore and Johor come together, we provide a complete service offering and also an ample area for growth.

How do you see Johor positioned to become an Asia LNG hub and what is your view on the future of Malaysia and Singapore as Asia’s joint LNG hub?

With the shift from heavy fuel oil and distillate to LNG, Singapore and Malaysia are in a unique position to become the driver of the trend and shape the direction of LNG trading within the area. The size of LNG parcels can only increase, which will benefit Johor given our lack of size constraints. Singapore, meanwhile, has the advantage of hosting Platts and its indicator of pricing for fuel. In this sense, Singapore and Malaysia would be well poised to host another Henry Hub-type benchmark for LNG. After all, more users would probably prefer to go into such a spot pricing market rather than the current long-term contract system.

In 2012, you were appointed chief executive of Johor Petroleum Development Corporation (JPDC) after spending the majority of your career at Shell. How does heading this government body differ from your experience in the private sector?

After many years at Shell, a commercially-driven company focused on profit and loss, I entered the public sector. KPIs and objectives remain but the shareholders are different. At JPDC, we represent Malaysia Inc. and are in the business of nation building. Our main challenge thus lies in aligning individuals and convincing stakeholders to buy into our concept of nation building through the delivery of projects in Johor. Since shareholders are also citizens, they can be quite vocal, which means that engagement is pivotal. On the one hand, we do our utmost to keep citizens abreast of our vision and our activities, while also engaging with all the ministries and government agencies to ensure that relevant government stakeholders understand our project to monetize the assets present in Johor.

JPDC acts in many ways as a bridge between all of these stakeholders. How do you ensure efficient strategic cooperation and collaboration between these actors to manage the country’s largest-ever infrastructure project?

JPDC has worked to ensure efficient collaboration at both the state and federal levels. At the Johor state level, a Steering Committee chaired by the Johor state secretary ensures that all state agencies are aligned in terms of the importance and the urgency of resolving matters pertaining to the PIPC project. At the federal level, we have a Federal Projects Steering Committee, chaired by the Chief Secretary to the Government of Malaysia, to monitor and resolve any project issues. These bodies help to rapidly and effectively bring solutions to the challenges in managing this megaproject.

How far is Malaysia on its ambition to become an oil and gas hub?

In terms of upstream activities, Malaysia is already very much a hub, as a mature player and net exporter of oil and gas. In this sense, we are not that far off from Stavanger, and we even export our capabilities, with Malaysian professionals and expertise found from the North Sea to the Middle East to Houston. Furthermore, Malaysia has embarked on technologically advanced and difficult projects in the areas of HPHT, deepwater and EOR.

In terms of downstream activities, Malaysia is still in our infancy stage. With all of these upstream efforts, it would be a shame for the local crude product to simply be refined and sold to the market. JPDC thus focuses on stretching Malaysia’s petrodollar to its maximum level, with the PIPC projects aiming to add more value to our resources. At the end of the day, the New Economic Model underlying PIPC focuses on local support and participation, based on our desire to bringing citizens along in the journey of economic and social growth. Our ambition is for PIPC to create high paying jobs and be both sustainable and inclusive motor of growth for Johor and Malaysia as a whole.

To read more articles and interviews from Malaysia, and to download the latest free report on the country, click here.

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