BASF, the world's biggest chemical maker, will stop pursuing a joint venture with Petronas to construct a petrochemical plant, as part of the RM60 billion Petronas Refinery and Petrochemical Integrated Development (Rapid) project in Pengerang, Johor.
The companies said that it has terminated a "heads of agreement" (HOA) announced in March last year, which called for investments of RM4 bilion to expand their partnership in Malaysia.
"It's part of the enlarged Petrochemical complex. The news is slightly negative but Petronas Chemicals can still rope in other partners," said Alliance Research analyst Arhnue Tan.
She said that the cancellation of the BASF-Petronas portion of the Pengerang project may set back, but not jeopardise, the overall project.
Under the terms of the HOA, the partners had agreed to form a new entity , BASF (60 percent) and Petronas (40 percent), to jointly own, develop, construct and operate production facilities for isononanol, highly reactive polyisobutylene, non-ionic surfactants, methanesulfonic acid.
"Both parties are unable to come to an agreement on the terms and conditions for the implementation," the companies said in a jointly-issued statement.
However, Petronas and BASF continue to jointly operate the petrochemical plant in Gebeng industrial zone in Kuantan.
The 150ha integrated chemical site produces acrylic monomers, oxo products and butanediol. The complex is one of the largest integrated chemical sites in the Asia Pacific region, BASF said on its Asia Pacific website.
The Petronas spearheaded Rapid project proposed an oil refinery with a capacity of 300,000 barrels per day to produce gasoline and diesel that meet European specifications and related petrochemical complexes.
It aims to capitalise on the growing need for specialty chemicals and to meet the demand for petroleum and commodity petrochemical products in the Asia Pacific region by 2016.
However, the project has faced resistance from a number of Pengerang residents, politicians and environmental groups.
Earlier this month, four families from Pengerang applied for a judicial review in a bid to stop the acquisition of their lands for the Rapid project.
LAWRENCE YONG is a reporter for Kinibiz.com, Malaysiakini's business news portal which will be launched next month.