Hengyi joint venture plans US$13.7 billion petrochemical expansion in Brunei
Second phase will allow Pulau Muara Besar complex to supply refined products to international markets
23 Sep 2020 | Michael Marray

Hengyi Petrochemical is preparing for the US$13.65 billion second phase of its refining and petrochemicals joint venture in Brunei. The US$3.45 billion Phase 1 is already up and running, making Hengyi Industries Sdn Bhd (Hengyi Industries) the largest overseas investment by a private Chinese company, and the largest foreign direct investment, in Brunei.

Hengyi Industries is a joint venture between China's Zhejiang Hengyi Group (70%) and Damai Holdings (30%), a wholly owned subsidiary of the Brunei government's Strategic Development Capital Fund. Hangzhou-based Hengyi Petrochemical is one of the leading petrochemical groups in China, and is listed on the Shenzhen Stock Exchange.

In a stock exchange filing on September 15, the company said it plans to add a 14 million tonnes per year (280,000 barrels per day) oil refinery, together with a paraxylene unit, at its complex in Pulau Muara Besar, a 955-hectare industrial park on an island in Brunei Bay. It will also build an ethylene plant and a purified terephthalic acid (PTA) facility there. Paraxylene and PTA are key materials for making polyester fibre, used in textiles and packaging.

Hengyi's chief executive officer Chen Liancai has been reported saying that the construction of the proposed second phase of the oil refinery and petrochemical project is expected to take three years. The project is currently awaiting final approval from the Brunei government. "After the completion of the second phase, our products will not only meet the domestic market demand in Brunei, but also supply the regional and international markets," says Chen.

The first phase, with 8 million tonnes of crude oil refining capacity per year, reached full operation in November 2019, after around three years of construction. The second phase provides another building block for Brunei's petrochemical industry. The joint venture is an important element of the Southeast Asian country's ambitions to further develop the downstream segment of its energy sector, while promoting national self-sufficiency. For Zhejiang Hengyi Group, it forms part of a fully integrated industry chain.

The Sultan of Brunei has set out ambitious long-term economic growth and social development plans under the framework of Wawasan Brunei 2035, including attracting more foreign direct investment.

In May of this year, Hengyi Industries held a ceremony to mark the first supply of transportation fuels (gasoline, diesel and Jet A1 fuel) to Brunei Shell Marketing Company Sdn Bhd (BSM), starting Pulau Muara Besar Refinery’s supply of refined fuel products for the domestic market. The refinery is expected to reduce Brunei’s dependence on imported fuel products while also generating products for export.

This is part of Hengyi’s commercial agreement with Brunei Shell Marketing, signed in September 2019, to supply refined fuel products to BSM for domestic market distribution. It signifies a new milestone for the country’s downstream industry with the extension of the domestic oil and gas value chain.

The Pulau Muara Besar oil refinery and aromatics complex is capable of producing 13 different types of petroleum products. Hengyi will be supplying a total of 427,509 barrels of refined fuel products to BSM, consisting of 190,778 barrels of gasoline, 159,924 barrels of diesel, and 76,807 barrels of jet fuel to meet monthly domestic demand. 

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