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KUALA LUMPUR, Malaysia (AP) — Oil major Saudi Aramco has signed a $7 billion deal to take a 50 percent stake in a mega Malaysian oil refinery project, in a pact expected to help Saudi Arabia increase trade in Southeast Asia.
Aramco inked the agreement Tuesday with Malaysia’s national oil company Petronas, which is developing the $27 billion project plant in southern Johor state bordering Singapore.
It includes a refinery with the capacity to churn out 300,000 barrels of oil a day, a cracker plant and a petrochemical complex with an annual production capacity of 7.7 million metric tons.
Officials have said the deal will make Aramco the single largest investor in Malaysia.
Saudi Arabia is the world’s largest oil exporter, with much of its crude destined for customers in Asia.
Saudi’s Energy Minister Khalid Al-Falih said the Malaysian deal will help expand Aramco’s portfolio ahead of its initial public offering next year, which is touted to become the world’s largest share sale.
Petronas chief Wan Zulkiflee Wan Ariffin hailed it as a “historic moment for the industry” for two national oil companies to tie-up for a mammoth greenfield project.
It took three years to negotiate the deal, said Aramco’s CEO Amin H. Nasser. He said Aramco will supply up to 70 percent of the refinery’s crude feedstock requirements.
“Malaysia offers tremendous growth opportunities and today’s agreement further strengthens Saudi Aramco’s position as the leading supplier of petroleum feedstock to Malaysia and Southeast Asia,” Nasser said. “It would also serve to enhance energy security in the Asia-Pacific region.”
The signing of the agreement was witnessed by Saudi King Salman, who arrived here Sunday with an entourage of 600 on a multi-nation tour to boost economic ties with Asia.
The king’s visit is his first to Muslim-majority Malaysia since he took the throne in January 2015. His predecessor, King Abdullah, visited in 2006.
Ties between the two countries drew attention when Malaysia’s attorney-general said about $700 million transferred to Najib’s personal bank account in 2013 was a donation from the Saudi royal family. He said most of it was returned.
Najib has denied allegations the money was from the indebted Malaysian state fund 1MDB that he founded. The 1MDB fund is at the center of allegations of a vast international scheme of embezzlement and money-laundering and is being investigated by several countries including the U.S., Switzerland and Singapore.
After Malaysia, King Salman is due to visit Indonesia, Brunei, Japan, China and the Maldives, the official Saudi Press Agency said. He also will visit Saudi Arabia’s neighbor Jordan before returning home.
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