Thursday 28 Mar 2024
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This article first appeared in The Edge Financial Daily on May 29, 2019

KUALA LUMPUR: Hengyuan Refining Company Bhd expects to begin production of Euro 4M Mogas gasoline in the fourth quarter of this year (4Q19), ahead of the January 2020 deadline fixed by the government previously to roll out the fuel standard.

Hengyuan chairman Wang YouDe (pic) said the group had allocated US$205.3 million or RM852 million as capital expenditure (capex) to upgrade refinery capabilities in the financial year ending Dec 31, 2019 (FY19).

“The sum is primarily meant to be spent on four ongoing infrastructure projects related to Euro 4M, clean air regulation (CAR), hydrogen generation (H2GEN) and Euro 5 Gasoil (Euro5G). For Euro 4M, we expect to complete it in September and start production in the fourth quarter, with a designed capacity of one million tonne a year,” he told reporters after the group’s annual general meeting yesterday.

The CAR project is still under construction, said Wang, and is on track for completion in 3Q19.

On H2GEN, he said the group had commenced the design and construction phase, with first production expected to be in September 2020.

“For the Euro5G project, we have reduced the scope extensively with considerable capital savings, which will allow Hengyuan to manage the project in-house. Hengyuan has also completed all necessary tie-ins for the commissioning and start-up of the Euro4M, Euro5G and H2GEN projects, so there will be no significant plant downtime required before commissioning,” he said.

Without the 11-week production suspension the group had to endure in FY18, Wang said Hengyuan is targeting to produce 39 million barrels of gasoline in FY19, versus 32 million barrels last year.

“In terms of whether there will be revenue growth, it has to depend on the spread between crude and refined products. In 2017, our spread was around US$8 a barrel, [and then] it went lower in 2018. Now, we are having a spread of around US$4,” he said.

In FY18, Hengyuan undertook major maintenance of its 56-year-old refinery, called Major Turnaround 2018 (MTA2018), which Wang said the group completed two days ahead of schedule.

During MTA2018, Hengyuan also replaced the Long Residue Catalytic Cracker regenerator top dome under a project called Atlas II, which increased operating efficiency.

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