RAPID - NOT SO RAPID!

PETRONAS has been in the headlines since early of this year starting with Saudi Aramco agreement to buy 50 % equity in the Refinery and Petrochemical Integrated Development (RAPID) project for USD 7 billion.

What is RAPID?

RAPID is part of the USD 27 billion Pengerang Integrated Petroleum Complex (PIPC) project announced in 2011 to be built on a 20,000 acres plot of land in Tanjung Pengerang, Johor. It consists of a 300,000 barrels per day (bpd) complex refinery and a liquid cracker which will yield more than 3.0 million tons of petrochemical products per annum. Though it was initially planned to be commissioned in 2016. It has been delayed to 2019.

Is it a good project?

Singapore is the hub for oil trading in Asia Pacific Region. It is ASEAN biggest refining capacity (Malaysia has 50 % of Singapore’s capacity) and one of the biggest petrochemical capacities in the region along with Thailand. It is now vying to be a hub for LNG too. (Malaysia, on the hand, is very contented to be merely a producer). Singapore also has the vote of confidence from the industry as it becomes the regional pricing benchmark for petroleum and petrochemical products. In recent years, as the market players look for alternative to storage in Singapore, Southern Johor oil storage has started to be included as part of Singapore Straits pricing. RAPID or PIPC is riding on Singapore success which augurs well for the country and its people similar to Antwerp, Rotterdam and Amsterdam oil and gas hub in Europe. 

Why is PETRONAS on a “selling spree” despite having an excess of RM 130 billion cash in its balance sheet? Didn't it announce that it has the capability to go alone with RAPID?

In early October, PETRONAS Chemicals Bhd disposed its 50 % stake in PRPC Polymers Sdn Bhd to Saudi Aramco for USD 900 million  (RM 3.8 billion). During the same period, MISC (63 % owned by PETRONAS) announced the sale of its stake in Centralised Terminal Sdn Bhd (tank farm and terminal facilities business in Tanjung Langsat) to Dialog Group Bhd for RM 193 million. Not only that, MISC also sold its 50 % stake in VVTI B.V, to its JV partner for USD 830 million in August 2015. (VVTI is a global energy storage company which operates in 11 countries sprawled over 5 continents including Amsterdam-Rotterdam-Antwerp, Fujairah and Tanjung Bin.)

Considering RAPID will be on a long term storage lease with Dialog, why don’t PETRONAS consider taking up stakes in Dialog using the proceeds from the sale of VVTI and CTSB? It should have a keen eye to capture benefits along the value chain to secure stable dividends. Kerteh Terminal Sdn Bhd which PETRONAS jointly owned with Dialog and Vopak is an example of such initiative. 

In recent years, PETRONAS has relinquished their market presence in ASEAN by disposing their LPG business in Vietnam & the Philippines, retail business in Thailand & Indonesia and petrochemical business in Vietnam. On the other hand, its competitors have been actively expanding their footprints in ASEAN by acquiring or building downstream assets such as PTT, PETRON, Puma Energy and Total.

It begs the question of PETRONAS growth strategy in the region. What is the point of winning 4 consecutive F1 Constructors’ and Drivers’ Championship in F1 when it has no regional footprints to offer its products in ASEAN other than its lubricants? Is the profit from lubricant business sufficient to cover the cost of sponsoring the F1 team? PETRONAS is now a well known global brand. Therefore, the rationale of PETRONAS being in F1 shouldn’t be the same as decades ago when PETRONAS brand was relatively unknown globally. It should take advantage of the increase in global brand awareness by offering various products. On the other hand, despite relatively a newcomer, PETRON is giving PETRONAS a good run for their money in the domestic market. And PETRON doesn't get involved in F1! 

Looking on, PETRONAS is planning to sell some of its oil and gas assets under its Canadian unit, Progress Energy after scrapping the proposed USD 29 billion Pacific North West LNG project in Canada’s British Columbia. The decision should have been anticipated on the back of bearish outlook of LNG market, strong objections from the indigenous people, environmentalists & local politicians and the challenges to meet 190 environmental related conditions (akin to the legendary tale of 7 impossible conditions requested by Puteri Gunung Ledang to Sultan Melaka). Yet, it still took them years to decide. Hasn't its leadership repeatedly conceded that the LNG market outlook is bleak? 

Is there a need to build a refinery in RAPID?

Singapore and Thailand have a few integrated refineries and petrochemical plants similar to RAPID. Some of them have gas/liquid crackers and aromatics plants integrated with the refinery like PTTGC in Thailand. But they were built one after another, over few decades or at least few years gap instead of having all built at the same time. It was the same with Reliance which is the biggest refinery in the world at a single site. Therefore, they position themselves on less financial strain. 

RAPID’s liquid crackers will require more than 3.0 million tons of naphtha annually. Currently, PETRONAS is exporting about 2.0 million tons of naphtha annually. As such, it just needs to import about 1.0 million tons of naphtha which is not totally huge quantity considering surplus of naphtha in Asia. The most important aspect is to have the capability to receive big volume cargoes like terminals in Yeochun, South Korea and Chiba, Japan. They could command cheaper feedstock price as the potential sellers wouldn’t mind to share the freight savings rather than calling multiple ports. There is a need to have a mindset change in this aspect. I.e. being comfortable with importing feedstocks. Like some of the Japanese, Korean, Thailand, Indonesia and even in Johor liquid crackers which operate without direct feeds from a refinery.

Aside from naphtha, PETRONAS also is exporting other petroleum products including Jet A-1 and Gasoil from its Kerteh and Melaka refineries. For example, it is exporting about 4 cargoes of 300,000 bbls of 10 ppm Gasoil from Melaka refinery per month which can’t meet Euro 5 due to its inability to meet the cold property during winter. This has gone on since the late 90s. Until Malaysian government decides to change the fuel specifications to Euro 5, the Gasoil cargoes will most probably be sold without achieving its true potential market value. What a way to waste the resources!

Notwithstanding to that, RAPID refinery will position PETRONAS with more petroleum products to export. Bear in mind that there is excess of refining capacity in Asia. Chinese and Indian refineries among others have been exporting products to Europe, Africa and Latin America regularly. US also is a regular exporter to Europe and Latin America. What happens when there are more electric cars on the road? To exacerbate the situation further, there will be new refineries in Vietnam, Cambodia, Oman, Kuwait, Saudi, China and India among others to be commissioned from 2018 till 2020. The new addition of refineries (more than 2.0 million bpd) would certainly put pressure on the refining margins. 

Why did PETRONAS agree for Aramco to supply crude oil up to 70 % of the refinery requirements?

Crude oil arbitrage to Asia from Africa, Latin America, Russia, Canada and even from the US has been in trend since the beginning of US shale revolution. Due to surplus in the crude market, China, India, Japan and Thailand have been diversifying their crude supplies. They also reduce the purchase on long term contract as crude spot price outlook is more attractive.

Taking advantage of low oil price, China also has been sourcing crude oil for their refineries and strategic petroleum reserves. Instead of Saudi, Russia is now the main crude supplier to China followed by Angola. At the same time, they are also sourcing crude and gas via pipelines from Kazakhstan and Myanmar among others.

Considering Middle East is a high flash point area, PETRONAS should emulate those countries in diversifying its crude supply source. Does it have an alternative strategy should there be a supply disruption in Middle East? Or does it have the full confidence that there will be no Middle East supply crisis?

There is lesson to be learnt from Fukushima Earthquake tragedy. The Fukushima’s nuclear power plant builders did not anticipate the tsunami would breach their safety systems and containment structure. As a precautionary measure, all other Japanese nuclear power plants were directed to cease operations. As a result, they had to scramble to look for sweet crude oil and LNG to feed their power plants. Failing which, there could be power disruption in the whole of Japan. Unfortunately, there was not much sweet crude and LNG available in the prompt market. Whatever little that they could grab, they had to pay way above the market price.


Is Aramco crude price competitive relative to other similar grades from Middle East? 

For a complex refinery (costlier than simple refinery), cheaper heavy sour crude like Saudi’s Arab Heavy (AH) and Iraq’s Basrah Heavy (BH) are part of the main diet. However, BH price is cheaper than AH by about USD 4.00/bbl. This is base on cheaper BH Official Selling Price (OSP) and compensation for the heavier crude. BH also could be procured from different seller other than its national oil company i.e from the equity partners like Lukoil, CNPC, BP, Shell etc. PETRONAS  also has 4 blocks shared with other upstream players in Iraq. On the other hand, AH could only be bought from Aramco.

How long is the tenure of RAPID JV with Aramco?

The JV tenure with Aramco remains unknown. Though there is no rule of thumb on the JV tenure, it is still an important commercial element that could be shared to the public. The shorter the JV tenure, the faster the plants ownership is transferred to the host company. But what is the normal downstream industry JV tenure? 20 years? And what is RAPID’s JV tenure?

Is there a proper accountability to the HSE issue?  

Within this year, two mishaps occurred in the RAPID work site causing fatalities. Has thorough investigation been done and were there lessons to be learnt and shared with the staff and contractors? If good leadership means taking accountability of its failure in maintaining the highest safety standards as pledged, perhaps PETRONAS leadership should emulate the previous KL MRT Corp CEO in being accountable after the fatal incident which claimed three lives at Sungai Buloh MRT work site in August 2014.

Final analysis.

RAPID is a massive strategic project which will immensely benefit the country and its people. However, it also should be delivered in the best way possible to ensure long term sustainability of the project. PETRONAS should tap its past JV experience to protect its interest and achieve the best return possible, while addressing key operational issues which could possibly drain the operating profit at later stage. Hopefully, it will be a catalyst of growth for the country.

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BIG FISH IN A LITTLE POND

Few weeks ago, Petron Corporation announced a major plan to expand and upgrade their refineries in the Philippines and Malaysia. The biggest refinery in the Philippines will be de-bottlenecked from 180,000 to 270,000 bpd at a cost of USD 0.5 billion. The refinery last major upgrade was in 2014 where another fluid catalytic crackers (FCC) and a delayed coker unit (3rd in ASEAN after Dumai and Melaka) were installed which made it capable of producing more gasoline & petrochemical products and consume cheaper heavier sour crude oil.

Petron acquired ExxonMobil’s Port Dickson (PD) simple refinery in 2011 along with 560 retail stations and seven fuel distribution terminals. As part of the major plan above, the PD refinery will be de-bottlenecked to 150,000 from 88,000 bpd and upgrade its capability to produce  higher margins petroleum and petrochemicals products. The total expansion cost is estimated about USD 1.5 billion.

Operating Petron’s PD refinery has various challenges. To begin with, it could only consume low sulphur crude oil which is costlier than sour crude. It also lacks the secondary units to upgrade the crude oil residue to higher margins fuel. To exacerbate the situation further, they are constrained with inability to receive full AFRA vessel parcel size due to limited feedstock tankage. It also runs at lower throughput. Unlike other domestic refiners, it couldn't enjoy the Export Duty Savings (EDS) even though they are consuming domestic crude oil. 

Despite facing all the challenges above, Petron financial performance is impressive considering their higher operating and feedstock procurement costs. Yet, they are giving their competitors a good run of their money while continuously growing their retail outlets.

Contrarily, PETRONAS has been announcing exit strategies for most, if not all of their regional businesses in LPG, retail and petrochemicals segments. Its LPG business in Vietnam including import terminals in Hai Phong (north) and Dong Nai (south) was sold (or partly sold) to Totalgaz Vietnam Ltd. Its retail stations in Thailand and Indonesia were not spared either. Their only regional petrochemical plants outside Malaysia, Phu My Plastics and Chemical Company (PMPC) in Vietnam (PVC plant) was sold to Asahi Glass Company and Mitsubishi Corporation. Last week, it announced its divestment of their Philippines LPG business in Visayas and Mindanao, the last of its regional LPG presence in South East Asia. Their so called portfolio review exercise started around 5 years ago. Except for India LPG venture with IOC, there seems to be no follow up strategy for their international ventures.

Decades ago, PETRONAS was one of the the main exporters of LPG from its Tanjung Sulong Export Terminal (TSET) and later joined by Bintulu in a region that is short of LPG. Subsequently, around mid 1990s, it started the LPG business in the Philippines and Vietnam with the building of pressurized (small) terminals and bottling plants. However, the Philippines and Vietnam business never really grow despite growing LPG markets in ASEAN. About a decade later, a joint venture was formed with IOC, with refrigerated (big) terminal in Haldia and later in Ennore.  Recent years, Bintulu has stopped exporting LPG and supply from TSET has been inconsistent. 

This is an exemplary case of missing opportunity in capturing initial advantage to ensure sustainable business growth. What could have been done was to take advantage of significant freight difference between refrigerated and pressurized vessels to create opportunities. With a refrigerated terminal, Vietnam could have been the platform to venture into the whole of Indochina and Luzon (bigger and better growth market). Ironically, Totalgaz Vietnam Ltd continue to flourish despite not having any regional supply source. 

On the other hand, Lotte Chemical Titan Holding Berhad which run the only liquid crackers in Malaysia will be going for public listing to fund the building of its Indonesian affiliate’s liquid crackers and expansion of its existing polymer plants as well as its Johor’s existing petrochemical plants. In Indonesia, it will be the second crackers after PT. Chandra Asri Petrochemical crackers which is Indonesia’s premier petrochemical producer. Unlike RAPID, both companies have been operating their crackers without a refinery since early 1990s. 

Both Petron and Lotte Chemical Titan are making great stride expanding their regional footprints in taking advantage of the growing ASEAN region. International trading companies such as PUMA Energy (majority owned by the Dutch Trafigura and the Angolan  national oil company) and Vitol (leading oil trading company in the world) are also gradually increasing their investment in countries such as Malaysia, Indonesia and Myanmar. However, PETRONAS seem to be content to be a big fish in a little pond, living with imagination that their system is as big as oil majors. For some years, their focus have been on their RAPID project which has been deferred to 2019 from 2016 (can it be considered as rapid anymore?). 

Are they too obsessed with cost cutting initiatives to give a miss to any potentially good regional growth opportunities and erasing their regional footprints? Or have they not realized that managing cost is also part of managing business? What about business growth? Perhaps, top management of PETRONAS should have a pay cut by 10 to 20% to reduce the manpower cost as being done by some oil companies and banks. Increase of accountability should be at all levels including at the top management. More explicitly, the Executive Vice President (EVP) positions should be eliminated and the number of Vice Presidents (VPs) should be reduced. It will make the organization flatter and leaner. As such, decision making would be much faster. 

Business is not great after all, isn’t it?

PETRONAS was once great under its globally respected President/CEO and his small cadre  of competent VPs (without any EVP positions then) even when Brent crude oil price was at the current level or below. What happened to the Global Champion mantra that used to be envisioned by PETRONAS then? Isn't it an opportunity loss if they could’t fully leverage on PETRONAS products other than lubricants regionally (if not globally) after winning 3 consecutive F1 Constructors’ and Drivers’ World Champion?

Perhaps PETRONAS could learn from BP Plc’s resilience. As a consequence of 2010 oil spill incident in the Gulf of Mexico, BP had agreed to a final settlement of more than USD 20 billions after a federal court found the company of gross negligence about two years ago. Yet, by end of 2016, they bought 527 retail stations in Australia from Woolworths Ltd. Or closer to home, they could also learn from Air Asia, CIMB or even Maybank in growing their regional footprints. 

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CONNECTING PENINSULAR GAS UTILIZATION PIPELINE TO YUNNAN, CHINA : PART 2

In March 2017, PETRONAS claimed that it has forgone more than RM 200 billion in revenue from selling natural gas in Peninsular Malaysia at lower than international market price since the 1997/1998 Asian financial crisis. The 2016 amendment to the 1993 Gas Supply Act is an effort towards removing the domestic gas subsidies by liberalizing the domestic gas market. One of the major aspects of the bill is introduction of the Third Party Access (TPA) system where new players could participate in importing liquefied natural gas (LNG) and distribute through existing gas infrastructures at agreed tariff.

In anticipation to the new situation and taking advantage of cheaper coal price, TNB has increased the number of coal furnace at their power plants which are more efficient and consume lesser coal. As a result, the consumption of coal has increased to 51% (2016) and gas consumption has reduced to 45% (2016). This trend is expected to continue as coal percentage in the approved fuel generation mix exceeds 60% until 2025.

Meanwhile, in April 2017, it was reported that Melaka Re-Gasification Terminal (RGT) and Peninsular Gas Utilization (PGU) pipeline were underutilized by 50% and 20 - 25% respectively. However, as long as the domestic gas price is not in line with the international market price, it would be difficult to attract third party players to participate in the domestic market. Would Malaysia be able to attract more industries which would prefer to consume more gas? Should the gas market be limited to domestic consumers? 

How could the RGT and PGU utilization be maximized?

As mentioned in the previous article, transforming Malaysia to be a LNG Hub by connecting PGU pipeline to Yunnan would generate better value to many stakeholders.

Aside from burgeoning demand from China, significant demand could be tapped from Thailand as PTT, the national oil company of Thailand, has to increase import of gas due to growing domestic demand, decline of gas production from Gulf of Thailand and lesser supply of gas from Myanmar. (Thailand total fuel mix for gas is 70%) In March, 2017, PTT announced to spend USD 11 billion on projects and exploration acreage to arrest the situation. PTT will also increase their RGT capacity to 11.5 million tons per annum (mtpa) by 2019 from 10 mtpa. Thereafter, it will increase the RGT capacity to 19.0 mtpa by 2022/23. As such, it is crucial to work with PTT to materialize this initiative. (Malaysia RGT capacity will be 7.3 mtpa once Pengerang RGT is commissioned by end of 2017)

To cater to demand from China and Thailand, the PGU pipeline capacity would need to be expanded. The pipeline expansion could be opened to consortium of companies similar to the 1,768 km Baku-Tbilisi-Ceyhan (BTC) pipeline (transporting Caspian Sea crude oil and condensates to Mediterranean Sea). Likewise, various international and domestic companies such as Chinese Oil & Gas companies, PTT, Middle East gas producers, Oil majors, regional gas players as well as domestic funds like EPF could participate in the project. This could bring tremendous stream of revenue as well as unlock the market capitalization of PETRONAS Gas Bhd to more than RM 42 billion. 

Malaysian companies should look for opportunities beyond the domestic market to maximize value for the stakeholders. Why can't the logistical assets be leveraged and optimized? Are we satisfied to be a big fish in a little pond? Why other country which doesn't have resources like Malaysia strive hard to be a LNG Hub? Do we want to be Johnny-come-lately in LNG similar to oil hub situation? We certainly could do better given this opportunity. 

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CONNECTING PENINSULAR GAS UTILIZATION PIPELINE TO YUNNAN, CHINA

On July 5, 2002, ASEAN Council On Petroleum (ASCOPE) initiated Trans ASEAN Gas Pipeline (TAGP) Project to ensure secure and sustainable energy supply by undertaking multi border gas pipeline projects. However, to date, compared to Europe which has already established seamless gas networks, ASEAN cross border pipelines are bilateral in nature. 

Similar to China’s One Belt One Road (OBOR) initiative on railway projects from Kunming, Yunnan to Singapore for connectivity of transporting goods and people, it would be for mutual benefits of ASEAN and China to connect Malaysia’s Peninsular Gas Utilization (PGU) pipeline to Yunnan in transporting gas. Possibly, parallel to the railway tracks. For China, it would be good to have another source of gas supply other than from Central Asia, Russia and their LNG terminals. 

This initiative would be similar in concept to the 3,500 km Southern Gas Corridor project which connect Azerbaijan’s Shah Deniz II gas into Europe via existing Azerbaijan/Georgia South Caucus Pipeline (SCP) to the Turkish Trans Anatolia Natural Gas Pipeline Project (TANAP) and continue flowing to Italy via Trans Adriatic Pipeline (TAP).

The PGU/Yunnan gas pipeline initiative would also have minimal challenges from security perspective compared to the USD 10 billion Turkmenistan-Afghanistan-Pakistan-India (TAPI) 1,800 km gas pipeline project (operational in 2019) where the pipeline is exposed to attacks from Taliban.

Leveraging on strategic location and good relationship with China, Malaysia could be transformed into a LNG Hub where different market players will compete for a piece of the market. By utilizing the Re-Gasification Terminals (RGT) in Sungai Udang, Melaka and Pengerang, Johor (2017), LNG suppliers from Middle East, Australia and ASEAN would have the options to deliver LNG into the RGTs. These suppliers would be able to save their freight costs by reducing sailing times instead of delivering the LNG to East China. In other words, they are also bypassing the territorial disputes in South China Sea. 

Economic activities could be generated along the entire value chain starting from the construction of the pipelines, gas distribution and local industries. Malaysian companies such as Gas Malaysia Berhad would have the opportunities to participate in the initiative. Malaysia, Thailand and Laos would also earn pipeline transit fees from the distribution of gas. Secured energy supplies could also attract FDIs in various industries leading to jobs creation.

Creating new outlets would change the landscape of LNG play in Asia Pacific. LNG suppliers such as PETRONAS and Brunei LNG could diversify from their traditional markets (Japan, Korea, Taiwan and East China). Possibly, achieving better margins. It would generate flurry of activities as the Hub will attract various LNG producers, traders, brokers, shippers and storage players. US LNG could even end up in Malaysia when arbitrage is open. In some regions, air quality could be improved as better access to gas supplies may reduce consumption of coal in some industries and power generation.

Malaysia LNG Hub would present an opportunity to establish LNG/Gas exchange where the traded price could be the price reference or benchmark for Asia Pacific LNG/Gas. Similar concept could be adopted from Henry Hub (US) and UK’s National Balance Point (NBP). The exchange would also spur the development of financial services and promote international brand awareness for Malaysia.

The PGU pipeline connection to Yunnan will not only be a game changer for LNG in Asia Pacific but also elevate Malaysia's strategic importance in the region by becoming a gateway for gas supply to continental ASEAN and Yunnan. However, a joint effort between relevant countries is vital to realize this initiative similar to Southern Gas Corridor as mentioned above.

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ASIA PACIFIC CRUDE OIL EXCHANGE IN MALAYSIA

In US, Europe and Middle East, crude oil benchmarks are traded on futures exchange such as West Texas Intermediate Crude on New York Mercantile Exchange (NYMEX), Brent Crude on InterContinental Exchange (ICE) and Oman Crude on Dubai Mercantile Exchange (DME). Surprisingly, Asia Pacific which is a booming oil market has no international crude oil futures exchange. 

After abandoning the Asia Pacific Petroleum Index (APPI) pricing in 2010 and 2011, ASEAN (except for Indonesia) and Australia crude oil producers migrated to price their crude against Dated Brent which is derived from four North Sea crude (Brent, Fortis, Oseberg and Ekofisk). However, from the perspective of Asia Pacific crude market, Brent pricing doesn’t reflect the regional crude market fundamentals. Example: European refineries are increasingly being closed as they are not as competitive as the newer, bigger and more complex Asian refineries such as in Middle East, China and India. 

Since the last few years, the regional oil industry players have been raising the issue of suitability of Brent pricing for regional crude. Discussions among the industry's players have started since 2013 to look for viable options. However, there was not much concerted effort to come up with the alternative solution.

As the biggest exporter of oil in the region, Malaysia could take on the leadership role to establish the crude oil futures exchange based on some of the Malaysian Crude Oil (MCO) benchmark such as Kikeh and Kimanis crude. Regional crude from Indonesia, Vietnam, Brunei and Australia and even the growing volumes of imported West African crude could also be traded based on the futures exchange. It will open up to a universe of new market such as pension funds, banks and even to the retail investors. As such, it will increase the asset value of the MCO as it is not purely valued from oil refining perspective. “Futures premium” will also increase the value of the exchange crude as experienced by the Omani crude in DME.

Futures exchange is regulated and transparent where the transacted price is considered credible and fair. Similar to the Omani crude oil Official Selling Price (OSP) which is derived from the monthly settlement price, there will be minimal complaints on the MCO OSP. 

Due to the fluidity and speed of the oil market movement, it is always advisable and preferable to hedge close to when the physical deal is done. However, due to the time difference between Asia Pacific and London, this is not fully possible. As such, managing the exposure could be done more effectively in hedging exercise as it will be based on regional time instead of London time. Regional upstream players could also manage their activities risk exposure better by hedging against the futures exchange.

As the trading activities increase, it will spur the demand for crude tankage, shipping and other FDIs in refining and petrochemical. Inadvertently, this will also increase the development of the financial services and international brand awareness of Malaysia. As such, the futures exchange could help to transform Malaysia into a regional oil trading and storage hub inline with government initiative.

How to make this happen? 

Dubai Mercantile Exchange which is based in Dubai has been in operation since 2007. It is a partnership of three core shareholders and several strategic partners. The three core shareholders are Chicago Mercantile Exchange (CME) Group (50%), Oman Investment Fund (29%) and Dubai Holding (9%). The balance of 12% is owned by various companies including Shell, Vitol, Morgan Stanley, JPMorgan Chase and Goldman Sachs. In other words, DME is a well established crude oil futures exchange in Middle East using Omani sour crude for delivery of DME contracts. Riding on the success of DME and in tapping their expertise in managing crude oil futures exchange, Malaysian entity(ies) could work with DME to establish a futures exchange for sweet crude oil to be based in Malaysia. 

Malaysia always strive to achieve high income nation status via Knowledge-Economy. This could serve to be a successful model if it is well implemented and managed professionally. And this could also be the game changer to the crude oil market in Asia Pacific.

Aside from exploring for crude oil, building refineries and petrochemical plants, we should learn to connect the dots like our neighboring country which has no natural resources. We need to be bold to make that leap of faith. 

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