Budget 2023: JPDC Applauds Chemical, Petrochemical Activities Incentives, Pengeran’s Special Status (Updated)

Johor Petroleum Development Corporation Berhad (JPDC) welcomes the announcement by the Minister of Finance of Malaysia during the tabling of Budget 2023 in Parliament today that Pengerang is given special status and incentives for chemical and petrochemical activities.

Izhar Hifnei Ismail, Acting Chief Executive Officer of JPDC, said such status will boost the appeal of Pengerang Integrated Petroleum Complex (PIPC), a 22,904-acre (9,269 hectares / 92.69 square km) area planned for downstream oil and gas and petrochemical industries in Pengerang, Johor, as an investment destination for chemical and petrochemical activities.

JPDC is a subsidiary of Malaysia Petroleum Resources Corporation (MPRC), and both agencies ultimately report to the Economic Planning Unit of the Prime Minister’s Department. JPDC’s mandates include being the lead agency for the planning and co- ordination of the downstream oil and gas industry development in PIPC, promotion and facilitation of inward-bound investments in downstream oil and gas and petrochemicals into PIPC, development of industry-ready manpower as well as facilitation of participation by local workers and business people in the PIPC economic growth.

Izhar said that the development planning for PIPC spans a 25-year period from 2013 to 2037, divided into four phases. In Phase 1 (2013-2019), PIPC saw the development of two catalytic projects, namely the development of Pengerang Deepwater Terminals (PDT), an oil and petroleum-product storage facility with capacity of up to 5 million cubic metres, supported by deep water jetties, developed by DIALOG Group Berhad with investments of RM14.71 billion, and Pengerang Integrated Complex (PIC), comprising refinery and petrochemical facilities and supporting facilities, developed by PETRONAS with investments of USD27 billion. The Federal and Johor State Governments have also developed critical infrastructure and social amenities in PIPC worth more than RM3 billion to support industry growth.

Izhar says that at present, PIPC is in Phase 2 (2020-2026) of its development, and has received further committed investments of almost RM10 billion, including the development of Pengerang Industrial Park (PIP) by Johor Corporation.

“JPDC is currently facilitating and assisting three prospective investors in their feasibility studies towards establishing their downstream oil and gas and petrochemical businesses in PIPC,” Izhar adds. “We hope the special status would be a significant factor to help them choose PIPC and Pengerang as the location.”

Izhar also welcomes the budget allocation for the construction of overtaking lanes at the Senai-Desaru Expressway which links Pengerang to key economic areas such as Johor Bahru city, Iskandar Puteri city, Pasir Gudang ports and industrial areas, Senai International Airport and Tanjung Pelepas Port. “It would help address the challenges posed by increasing traffic volume plying Senai-Desaru Expressway with the operations of PIPC and resorts in Desaru.”

MPRC: An Uplifting Budget 2023 For OGSE Players

Budget 2023 will uplift oil & gas, services and equipment (OGSE) players with at least RM10 billion in funding to be made available directly for the sector’s benefit, said Mohd Yazid Ja’afar, President/CEO of Malaysia Petroleum Resources Corporation (MPRC).

“We commend the expansion of the RM1 billion Maritime and Logistics Fund by Bank Pembangunan Malaysia Berhad to include oil & gas support services as well as shipbuilding and repairs. This is expected to benefit OGSE players, especially the close-to-100 offshore support vessel (OSV) service providers in Malaysia.

“MPRC has been actively engaging with the Malaysian OSV Owners Association (MOSVA), Association of Marine Industries of Malaysia (AMIM) and PETRONAS to understand the issue of ageing ships which requires the construction of up to 100 new ships, as well as the repair of existing ships. The financing could be utilised in the construction and repair of OSVs to support the offshore oil & gas operations throughout the country,” said Mohd Yazid in response to the Budget 2023 announcement today.

The announcement comes after a tumultuous period for the OGSE players during the 20202021 lockdowns and slowdown in economic activities by major economies as a result of the COVID-19 pandemic, which also saw a plunge in oil prices due to reduced global demand for hydrocarbons. 

MPRC, a Federal agency under the supervision of the Economic Planning Unit (EPU) also views positively the RM9 billion financing guarantee scheme by Syarikat Jaminan Pinjaman Perniagaan (SJPP) for small and medium-sized enterprises (SMEs) including oil & gas vendors.

“The financing guarantee scheme will allow local OGSE companies to draw down much needed funds to purchase new equipment, refurbish existing equipment and support business operations, mainly in this post-COVID-19 era that has resulted in depletion of cash-in-hand among OGSE players. 

“We hope financial institutions and development financial institutions could also play their role in the risk and credit assessment in relation to the OGSE industry; and that the financing guarantee scheme, will increase the eligibility of more OGSE companies to secure funds for their operations,” added Mohd Yazid. 

The duty stamp exemption of 100% on restructuring or rescheduling of loans/funding until 2024 and tax reduction from 17% to 15% for the first RM100,000 of taxable income for micro, small and medium-sized enterprises could also provide welcome relief for OGSE companies to emerge from the liquidity headwinds. 

Furthermore, MPRC supports Budget 2023’s reinforcement of the sustainability agenda, including the announcement of the development of a Sustainability Framework by GLCs/GLICs. 

“We are optimistic that the Sustainability Framework could serve as a reference point for the National OGSE Sustainability Roadmap and Framework to be developed by MPRC in 2023 and 2024,” said Mohd Yazid.

The Federal Budget also provides a vital boost to SMEs in adopting sustainable practices and participating in the energy transition, including the Green Investment Tax Allowance (GITA) and Green Income Tax Exemptions (GITE); the RM1 billion in soft loans under the High Tech and Green Facility (HTG) to support start-ups in innovative sustainable technology; and the RM1 billion Low Carbon Transition Facility to support SMEs in the shift to decarbonisation. 

Furthermore, the introduction of a carbon tax will help accelerate the energy transition, while MPRC also commends the RM10 million in matching grants to help SMEs prepare for carbon assessment. 

Additionally, the GITA and GITE supports initiatives to pivot OGSE companies to oil & gas adjacencies such as renewable and solar energy under the National OGSE Industry Blueprint (OGSE Blueprint) 2021-2030, which MPRC oversees the implementation of.

Budget 2023 also continues to support capacity-building and skill development programmes across all industries, including OGSE, with the key goal of ensuring the Malaysian workforce has the necessary skills to meet the economic demands and ever-changing labour landscape of the country. Among others, RM6.7 billion has been allocated to seven Ministries for a variety of TVET initiatives and HRD Corp., with a RM750 million allocation for capacity-building programmes that will benefit over 800,000 workers. 

“Budget 2023 is a testament of the government support to the OGSE sector; and MPRC and the OGSE Blueprint implementing agencies and partners are committed in strengthening the sector as per the Blueprint,” concluded Mohd Yazid. 

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