335 SOGIP Masterplan

Disclaimer

This document is jointly prepared by Sipitang Oil and Gas Development Corporation Sdn Bhd (SOGDC), Sabah Institute for Development Studies (IDS), Malaysia Petroleum Resources Corporation (MPRC), PETRONAS Chemicals Group Bhd (PCG), PETRONAS Gas Bhd (PGB), PETRONAS Malaysia Gas Management (MGM) and Petroleum Management Unit (PMU), Performance Management and Delivery Unit (PEMANDU), PETRONAS Sabah Labuan Regional Office (SLRO) and SOGIP Industry Advisor (all above defined as the Parties) that includes general background information about the parties current and planned activities as at the date of this document.

This information is given in summary form and does not purport to be complete. Information in this document, including forecast financial information should not be considered as advice or recommendation to investors or potential investors in relation to holding, purchasing or selling securities or other financial products or instruments and does not take into account any particular investment objectives, financial situation or needs. Before acting on any information, readers should consider the appropriateness of the information having regard to these matters, any relevant offer document and in particular, readers should seek independent financial advice. All securities and financial product or instrument transactions involve risks, which include, among others the risk of adverse or unanticipated market, financial or political developments and, in international transactions, currency risk.

This document may contain forward looking statements including statements regarding the intent, belief or current expectations with respect to the Parties businesses and operations, market conditions, results of operation and financial condition, capital adequacy, specific provisions and risk management practices. Readers are cautioned not to place undue reliance on these forward looking statements.

Each forward-looking statement speaks only as of the date of this document. The Parties do not undertake any obligation to publicly release the result of any revisions to these forward looking statements to reflect events or circumstances after the date hereof to reflect the occurrence of unanticipated events. While due care has been used in the preparation of forecast information, actual results may vary in a materially positive or negative manner. Forecasts and hypothetical examples are subject to uncertainty and contingencies outside the Parties control. Past performance is not a reliable indication of future performance.

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1.0 EXECUTIVE SUMMARY 2

2.0 BACKGROUND 3 2.1 SABAH NATURAL GAS SUPPLY SCENARIO 5 Total Discovered Gas Resources in Sabah 5 Sabah Gas Supply Network Infrastructure and Demand Centres 5 Gas Supply to Kimanis and Sipitang 6

3.0 INTRODUCTION TO SOGIP 7 3.1 SOGIP VISION AND MISSION 8 Vision 8 Mission 8

4.0 SOGIP MASTER PLAN 9 4.1 Objective 10 4.2 Terms of Reference 10 4.3 Benchmarking 10

5.0 INVESTMENT SCENARIO & INDUSTRIAL PLANNING ACTIVITIES 13 5.1 Investment Scenario 14 5.2 Phase 1 SOGIP Development 14 5.3 Phase 2 SOGIP Development 16

6.0 LAYOUT PLANNING 21

7.0 SUPPORT SERVICES PLANNING 23 7.1 Support Services Planning in Sipitang 24 7.2 Support Services Planning in SOGIP 24

8.0 INFRASTRUCTURE PLANNING 27 8.1 Roads 28 8.2 Port and Jetty Facilities 28 8.3 Land and Site Preparation 28 8.4 Land Allocation Process 28

9.0 UTILITIES PLANNING 29 9.1 Centralised Utility Facilities (CUF) 30 9.2 Water Supply 32 9.3 Telecommunications 32

10.0 INCENTIVES & PROMOTIONS 33 10.1 Incentives 34 10.2 Promotions 35

11.0 IMPACTS & BENEFITS TO SABAH STATE 37

12.0 SOGIP DEVELOPMENT PLAN 39 12.1 Proposed Governance Structure 40 12.2 Statutory Requirements 41

13.0 SOGIP KEY SUCCESS FACTOR 43APPENDICES 45 Governance Structure 45ACKNOWLEDGEMENTS 47ABBREVIATIONS 49

Table of ContentsCHAPTER 1

CHAPTER 2

CHAPTER 3

CHAPTER 4

CHAPTER 5

CHAPTER 6

CHAPTER 7

CHAPTER 8

CHAPTER 9

CHAPTER 10

CHAPTER 11

CHAPTER 12

CHAPTER 13

| SIPITANG OIL & GAS INDUSTRIAL PARK (SOGIP) MASTERPLAN iv

2.0 BACKGROUND 5Figure1 :SummaryofTotalDiscoveredGasResourcesinSabah 5Figure2 :LocationofDemandCentresinSabah/WPLabuan 6Figure3 :NewindustriesinKimanisandSipitang 6Figure4 :SupplyoutlookforKimanisandSipitangCustomers 6

5.0 INVESTMENT SCENARIO & INDUSTRIAL ACTIVITIES PLANNING 14Figure5 :LocationofSipitangandSOGIP 14Figure6 :PotentialammoniaandUreaderivativestobedeveloped 16Figure7 :GrowthinAsiaCrudeConsumption&Comparison ofcrudesupplydistribution 18Figure8 :SOGIPDevelopmentPlan 20

6.0 LAYOUT PLANNING 22Figure9 :LayoutPlanningofSOGIP 22

9.0 UTILITIES PLANNING 30Figure10 :Comparisonbetweencommonconceptand centralisedutilityconcept 30

10.0 INCENTIVES & PROMOTIONS 35Figure11 :PromotionalProgrammesinSOGIP 35

12.0 SOGIP DEVELOPMENT PLAN 40Figure12 :ProposedGovernanceStructure 40Figure13 :SOGIPOrganisationalChart 41

List of FiguresCHAPTER 2

CHAPTER 5

CHAPTER 6

CHAPTER 9

CHAPTER 10

CHAPTER 12

SIPITANG OIL & GAS INDUSTRIAL PARK (SOGIP) MASTERPLAN | 1CHAPTER 1

EXECUTIVESUMMARY

| SIPITANG OIL & GAS INDUSTRIAL PARK (SOGIP) MASTERPLAN 2

1.0 EXECUTIVE SUMMARY

ThisSOGIPmasterplanprovidesthefoundationwhichidentifiesandexploresthepotentialindustriesindevelopingSOGIPasapremierindustrialparkfocusinginthedevelopmentofpetrochemicals.ThismasterplanisalignedwithSabahDevelopment Corridor (SDC) andMalaysias Economic Transformation Programme (ETP). It serves as aguidancetooutlineandimplementtheplanneddevelopmenttakingintoaccountSOGIPsstrategicpositioningandpotentialinvestmentsbasedongasandnon-gasusage.Utilities,infrastructures,incentives,promotions,statutorystandardsandcentralisedapprovingauthoritiesarealsooutlinedaskeysuccessfactors.

TheSOGIPmasterplanshallbeguidedaccordingtothegasavailability,gascomposition,alignmentofSDCandETPandmaximisationofgasusageinSabahstatebyaddingvaluetothesupplychain.

TheultimatevisionistomakeSOGIPasthepremieroilandgasindustrialparkofchoiceforpetrochemicalhubinAsiaPacific.SOGIPadoptsandemulatesthebestpracticesfromothersuccessfulindustrialparksaroundtheworldnamely Jurong IslandDevelopment in Singapore, Jubail Industrial City in SaudiArabia and JamnagarRefineryComplexinIndia.

With thebenchmarkingagainstotherprominent industrialparks,SOGIPwillemergeasoneof thenewupandcomingindustrialparksfocusingonthedevelopmentofpetrochemicals.

SIPITANG OIL & GAS INDUSTRIAL PARK (SOGIP) MASTERPLAN | 3

MOUNT KINABALUTallest Mountain in Malaysia, with the highest peak at 4095.2M above sea level.

CHAPTER 2

BACKGROUND

Photo Source :http://www.horizonborneo.com


2.0 BACKGROUND

The oil and gas sector is the mainstay of Malaysiasgrowth since oil was first drilled in 1910 in Sarawak1.Furthermore,thefoundingofPETRONASin1974istheforceforthedevelopmentoftheoilandgasresourcesandplaysamajorroleindrivingtheindustrysgrowthinMalaysia.Malaysiaisoneoftheworldslargestnaturalgas and crude oil reserves inwhich Sabah has about13.22trillioncubicfeet(tcf)ofgas.

Latest discovery of oil offshore of Sabah, initialestimatesputthewells reservesat227millionbarrelsof oil equivalent2. Sabah has the potential for deepwater exploration, oil andgas services and integratedpetrochemical3.Oneof themajorprojects inSabah islocated atMengalong, Sipitangwhich is 145 km fromKota Kinabalu. Sipitang is a town, district and alsoa parliamentary constituency located in the InteriorDivisionofSabahwithapopulationof34,8624.Thetownisset tobecomeoneofSabahsoilandgas industrialcentres following the state governments decision tobuildaworldclassintegratedindustrialparkdesignatedfor oil and gas related and other heavy industriesthroughindustrialclustering.

Sipitang Oil and Gas Development Corporation(SOGDC)wasformedtospearheadthedevelopmentoftheSipitangOilandGasIndustrialPark(SOGIP).SOGDCwill act as a special purpose vehicle (SPV) companytoown,develop,manageandmarket the4,065acresof land inSOGIP.Under the ambitof theSabah stategovernment, SOGIP site is expected to attract newinvestmentsworthanestimatedRM35.1billionwiththepotentialofcreating3,745newjobopportunities5uponits completion. SOGIP, which was approved in 2010,hasalreadybegunattracting localand foreignoilandgas investors to scout numerous possible investmentopportunitiesonthesite.

The availability of natural gas as feedstock fromSabahs offshore production facilities is one of themanyattractiveproposalsthatenableSOGIPtobewellpositioned to spearhead the development of the oilandgas industry inSabahstate. Industries thatwouldbenefitfromnaturalgasfeedstockinclude:

Petrochemicals plants to manufacture resins,plastics, pharmaceutical products, fertilisers andpackagingmaterials

Heavyindustries Logisticscentreforexports Research&Development (R&D) forbio-fuels and

alternativeenergies Fabrication,constructionandrelatedactivities Bulkproductstorage

Basic infrastructure facilities, utilities and generalamenitiessuchaswatersupply,electricitysupply,androads will be constructed on the site. Following this,jettiesforimportingrawmaterialsandexportingvarioustypesoffinishedproductswill bebuilt togiveSOGIPtheaccesstoglobalmarkets.

Besides that, new residential, retail and commercialdevelopments will be built concurrently within theneighbouring area to make SOGIP site liveable andappealingtotheemployeesworkingonthesite.

Asasignofconfidenceonthesiteseconomicviability,PETRONASChemicalsGroupBhd.(PCG)isbuildinganammonia and urea manufacturing complex in SOGIPatanestimated investmentcostofUSD1.5billion.TheSabah Ammonia-Urea (SAMUR) project is one of theleading initiatives to monetise natural gas obtainedfromSabahsoffshorewells.

The SAMUR Project is among the most recent andstrategic developments located within SOGIP thatsupportstheoilandgasindustryinSabah.Thecomplexwould comprise of an ammonia plant, a urea plant, agranulation plant, as well as an integrated utility unitand jetty facilities. The ammonia plant is expected toproduce2,100metrictonnesperday(MTPD)of liquidammoniawhiletheureaplantwillproduce3,500MTPDof granulated urea. Construction has started in thesecond quarter of 2012 with completion targeted in20156.

Furtherdevelopmentofpetrochemicalssectorisguidedby theestimatedgasavailabilityandgascompositionwhichisrichinmethane.

1EconomicTransformationProgrammeReport2EconomicTransformationProgrammeReport3MyCorridorwebsite:www.mycorridor.malaysia.gov.my4www.statistics.gov.my,basedonyear20105SabahOil&GasDevelopmentLabReport6MPRCwebsite:www.mprc.gov.my


2.1 Sabah Natural Gas Supply Scenario

Total Discovered Gas Resources in Sabah

As of 1st January 2013, the total discovered gasresources in Sabah stood at 13.22 Trillion standardcubicfeet(Tscf)asdetailedinFigure1.Fromthetotaldiscovered resources, 21% is in producing stage, 42%is indevelopmentstageandtheremaining37%oftheresourcesarebeingactivelystudiedinternallyforfuturemonetisation or development plan to meet the gassupplycommitment.

Continuous effort to monetise these discoveries areimportant to ensure the sustainability of gas supplyto downstream gas customers. Looking forward,

monetisingthesefieldswouldbetechnicallychallenging.Inaddition,themonetisationoftheseresourcesishighlydependent on the downstream gas price to ensureeconomicviabilityoftheproject.

Notwithstanding the challenges mentioned above,PETRONAS is continuously pursuing the explorationsefforts inSabahwaterswithupstreamplayerssuchasLundinPetroleum,Talisman,MurphyOil,Shell,etc.

With attractive Production Sharing Contract (PSC)terms,PETRONASisexpectinganincreaseininvestmentandparticipationofnewplayersintheupstreamsector.

Total Gas Discovered Resources in SabahResources (Tscf)

15

10

5

-

Producing NAG Producing AG

Figure 1 : Summary of Total Discovered Gas Resources in Sabah

Development Pre-Dev(Committed)

TotalDiscoveredResources

Pre-Dev (Non-committed)

Figure 1: Summary of Total Discovered Gas Resources in Sabah

Sabah Gas Supply Network Infrastructure and

Demand Centres

Currently, there are two (2) major and active PSC inSabahthataresupplyinggastothethree(3)existingdemandcentresviamorethan300kmofgaspipelines.

The three (3) existing demand centres locatedindependently in Sabah and Wilayah PersekutuanLabuan namely Sabah Gas Terminal (SBGAST) in Kg

Gayang, Tuaran and LabuanGas Terminal 1 (LGAST-1)andLabuanGasTerminal2(LGAST-2)botharelocatedinWilayahPersekutuanLabuanasshowninFigure2.


By the end of 2013, a new demand centre known asSabah Oil & Gas Terminal (SOGT) in Kimanis, Sabahwill be on stream with a capacity of 1,250 mmscf/d.This development would also include a constructionofSabah-SarawakGasPipeline(SSGP)fromSabahOilandGasTerminal(SOGT)toPETRONASLNGComplex(PLC)inBintulu.

ThisnewdemandcenterisexpectedtoservethenewgascustomerslocatedinKimanisandSipitangareamainlyforpower,petrochemicalandreticulation industriesasillustratedinFigure3.

Figure 2: Location of Demand Centres in Sabah / WP Labuan

Gas Supply to Kimanis and Sipitang

PETRONAShascommittedatotalof250mmscf/dofdailygassupply(upto1.83tscfofgasresources)for15-20yearstothenewgascustomersinKimanisandSipitangasshowninFigure4.

Figure 3: New industries in Kimanis and Sipitang

KIMANISPower

Petrochemical

ReticulationSIPITANG

SOGT

Figure 3 : New Industries in Kimanis and Sipitang

Figure 4: Supply outlook for Kimanis and Sipitang Customers

Resources(mmscfd) Committed

250 mmscf/d~1.83 Tscf for 15-20 years300

200

200

2014 2019 2024 2029 2034Year

Figure 4 : Supply outlook for Kimanis and Sipitang Customers


INTRODUCTION TO SOGIP


3.0 INTRODUCTION TO SOGIP

3.1 SOGIP Vision and Mission

Vision

TobethepremieroilandgasindustrialparkofchoiceforpetrochemicalhubinAsiaPacific.

Mission

Maximize use of natural gas in Sabah alignedwiththeMalaysia Economic Transformation ProgrammeandSabahDevelopmentCorridor.

Develop SOGIP as petrochemical hub and as acatalystforoilandgasdevelopmentinSabah.

Create a value added supply chain in Sabah tosupportdomesticrequirementsinagro-industries.

Increase GDP and employment opportunities forSabahan.

Developandoptimiseoilandgasrelateddownstreambusinesses.

Innovateand explore future needs focusing onenergies,foodandenvironment.

Develop research and development centre forpetrochemicalsproductsthatwillmakeSabahself-sufficient,relevantandsustainableforitsresidents.

3.2 Land

SOGIP land size is 4,065 acres located inMengalong,Sipitangdistrict.It isapproximately12kilometresfromSipitangtown.TheareaisneartoSabahForestIndustries(SFI)andsituatedtothewestofSFI.ThenorthofSOGIPis theBruneiBay shoreline. It is approximately 150kmsouthofKotaKinabalucitycentrewhich isaccessiblevia theKotaKinabalu SipitangRoad. Time to travelfromKotaKinabalutoSipitangisabout2.5hours.

The area of SOGIP has been earmarked for oil andgas industry and downstream industries derived fromAmmonia and Urea. Out of the total 4,065 acres,PETRONASChemicalGroupBerhadthroughPETRONASChemical Fertilizer Sabah Sdn Bhd (PCFSSB) hasoccupied153acresfortheirUreaPlantknownasSAMURwhichiscurrentlyunderconstruction.

Theexistingsiteconditionisflat,overgrownwithshrubsandothervegetation.Alargepartoftheareaisgenerallysandy.Mangrovecanalsobefoundatthenortheasternsectionofthesite.PavedroadsarefoundatthefrontportionofthesiteofSAMUR.


SOGIP MASTER PLAN


4.0 SOGIP MASTER PLAN

Since formation of SOGDC and SOGIP in 2010, thedevelopment of the park has progressed to a criticalstage where a master plan is required to drive theinvestmentinitiatives.Aslikealldevelopmentofnaturalhydrocarbon resources in Malaysia, PETRONAS is theforefrontpartnerinthedevelopmentoftheoilandgasresourcesinSabah.

4.1 Objective

This document describes SOGIP master plan whichidentifies and explores the potential industries indevelopingSOGIPasapremierindustrialparkfocusinginthedevelopmentofpetrochemicals.Thismasterplanis aligned with Malaysias Economic TransformationProgramme (ETP) and Sabah Development Corridor(SDC). It serves as a principal guidance to outlineand implement the planned development taking intoaccount theSOGIPstrategicpositioningandpotentialinvestmentsbasedongasandnon-gasusage.Utilities,infrastructures, incentives, promotions, statutorystandardsandcentralisedapprovingauthoritiesarealsooutlinedaskeysuccessfactors.

4.2 Terms of Reference

SOGIP master plan shall be principally guided by

the followings:

Gasavailability o Phase1:allocationof90mmscfdofnaturalgas

toSOGIP o Phase2:subjecttofutureavailabilityofgasand

thegascomposition Natureoftheindustriesshallbebasedonmethane

richgascompositionasfeedstockorfuel InalignmentwithETP,SDCandSabahGovernments

aspirationofdevelopingtheoilandgasindustries Capabilitydevelopmentof local residentsofSabah

toparticipateintheoilandgasindustries Retaining resources and value within Sabah and

Malaysia. Maximisation of value added to supplychaininSabahstate

Integratedpetrochemicalcomplexwithfertilisersasthekeyproducts

Gasdistributiontobedevelopedforsmallmediumindustries(SMI)Centralisationofutilityfacilitiesforthe optimisation of gas usage and the supply ofutilities

Enable socio-economic developments spinning-offfromSOGIP

4.3 Benchmarking7

In transforming SOGIP into the premier oil and gasindustrialpark forpetrochemicals inAsiaPacific,bestpractices from three successful industrial parks havebeen identified to be adopted. The three identifiedindustrialparksareJamnagarRefineryComplex(India),Jurong Island Development (Singapore) and JubailIndustryCity(SaudiArabia).

4.3.1 Jamnagar Industrial Park

Jamnagar, located in the state of Gujarat, has threerefineriesownedbyReliancePetroleumandEssarOil.There are presently no major downstream facilitieslocated in Jamnagar. The total area for Jamnagar is7,885 acres with total investment of USD14.3 billion.The estimated jobs created are around 3,500 by theyear 2010. Refining and petrochemical are the twomain industries in Jamnagar. Reliances PetrochemicalComplexandEssarOilRefineryarelocatedatadistanceof7kmfromeachotherandarenotintegrated.

Through analysis of the Jamnagar Industrial Park,four best practices have been identified that greatlypromoteditsgrowthandinvestorsattractiveness;

1. Financial incentives

In Gujarat, many financial incentives have beenintroduced under Special Economic Zone (SEZ)schemes to reduce tax burden and provide acompetitiveinvestmentenvironment.

2. Integrated onshore product distribution

pipelines

BothRelianceandEssarOilrefineriestransporttheirproducts to North India through integrated crude,productandgaspipe-lines.Thishelpstherefineriestocutdownontheirdistributionandtransportationcosts.

7Source :MPRC,PengerangMasterplanDraftreportArthurDLittle


3. Superior refinery product slate

The refineries produce a high proportion of high-valueLiquidPetroleumGas(LPG)andpetrochemicalfeedstocks such as propylene (adding to over 10%on crude processed, compared to 2-3% for olderrefineries). The refineries are of full conversiontype and have no production of low-value fuel oil(comparedto12-20%oncrudeprocessedforsimplerrefineryconfigurations).

4. Proximity to major crude supply

The industrial park is ideally located on the westcoastofIndiaandhascloseproximitytotheMiddleEast,amajorsourceofcrudesupply.

5. Dedicated infrastructure and utilities

The industrial park has their owndedicatedpowerplant,waterandwastewater treatmentplantsandcommonportandterminalsfacilities.

4.3.2 Jurong Island

Jurong Island is a man-made island located to thesouthwest of Singapore,with an area of about 8,000acresandactasahub for the refining,petrochemicaland chemical industries. It is estimated around 8,000jobs has been created with the total investment ofUSD26 billion. The Jurong Town Corporation (JTC) isSingaporesprincipaldeveloperandmanagerofJurongindustrialestatesandtheirrelatedfacilities.

ThroughanalysisoftheJurongIsland,fivebestpracticeshave been identified that have greatly promoted itsdevelopmentandinvestorsattractiveness;

1. Availability of critical mass

Three major refineries and a cracker were alreadyestablishedbeforeanylandreclamationcommenced.Critical mass ensures security of supply and thusattraction for downstream players to establishfacilitiesclosetothesesources,therebyreducingthecostoftransportation.

2. Centralised service corridor and the Plug and

Play concept

Centralised provisioning of inputs, utilities andservicesreduceinvestmentrequirementforprimaryindustry players as well as operating cost for allinvestorsacrosstheisland,makinginvestmentquickandeasy.

3. Tight vertical and horizontal integration

Connection of adjoining industries in the valuechain through a common pipe network facilitatesthe transfer of intermediate streams vertically andhorizontally between producing and consumingfacilities.

4. Human resource development

Chemical Industry Manpower Advisory Committee(CHIMAC)andChemicalProcessTechnologyCentreweresetupbytheSingaporegovernmenttoensurean adequate supply of quality manpower for thepetrochemicalindustry.

5. Stable government and business friendly

environment

Singaporeiswellknownforefficientprocessesandtransparent systems,and ranksconsistentlyamongtheverytopcountriesintheworldintermsofeaseofdoingbusiness.

4.3.3 Jubail Industrial City

JubailisanindustrialcityontheArabianGulfcoastofSaudiArabia.Thecityisahubforrefining,petrochemicalandmetals-based industries.TheJubail IndustrialCity(JIC)developmenthasbeenplannedintwozones(JICIand JICII); these zones are located side-by-side andcoveratotalareaofapproximately40,000acres. It isestimatedaround55,000jobs(forJubailIndustrialCityII)hasbeencreatedwiththetotalinvestmentofSR65billion(USD17.3billion) in2004. It isexpectedthatby2022, an additional SR200billion (USD53.3billion)ofinvestmentswillbeattractedinJubailIndustrialCityII.TheRoyalCommissiononJubailandYanbu(RCJY) isthegovernmentbodymanagingthedevelopmentandoperationsat the industrialcitiesofJubailandYanbu.Through analysis of the Jubail Industrial City, fourbest practices have been identified that have greatlypromoteditsdevelopmentandinvestorsattractiveness;

1. High vertical integration

Development plans for Jubail focuses on highdownstream integration of petroleum basedindustries for producing petrochemicals, fuels andotherfeedstock.Theseoutputsnotonlywillincreasevalue-added exports but also provide critical rawmaterial for development of further downstreamindustries, including fertilisers, cement, etc. fordomesticandexportmarkets.


2. Efficiency of infrastructure concentration

Substantial investments have been made todevelop supporting infrastructure needed for thepetrochemical industry. Strategic locations havebeenidentifiedfor infrastructureandutilitieswhichfacilitatethemostcost-effectiveandenvironmentallysustainabledevelopment.

3. Development of human capital

Significant national investment programs inadvanced training have been made to meet thenationalmanpowerdemandwhichwouldbeneededforconstructionand laterprojectoperations in theindustrialcity.

8ArthurDeLittlePengerangMasterPlanReportPhotoSource:http://www.blpge.com

4. Availability of deep water port facility

The planned development of deep-water port toaccommodate required super tankers will be keysuccess criteria for development of the JubailIndustrialCity8


INVESTMENTSCENARIO & INDUSTRIALPLANNINGACTIVITIES


5.0 INVESTMENT SCENARIO & INDUSTRIAL ACTIVITIES PLANNING

5.1 Investment Scenario

SOGIP is the first oil and gas development in Sabahfocusing on petrochemicals. Itwill be the catalyst forthe development in Sabah along the west coast. ThedevelopmentoftheparkmustbealignedwithETPandSDCforoilandgassectorandbebeneficialtothestateofSabah.

SabahstateandPETRONASarepartnersindevelopingthe natural gas into methane based primarypetrochemicalssuchasammoniaandurea.Usingtheseprimary petrochemicals, development of potentialdownstreamvalueaddedproductssuchasammoniumsulphate, ammonium nitrate, diammonium phosphate,caprolactamandothersareexplored(Refertofigure5).

Diammonium Phosphate (DAP) is one of ammoniaderivativeswhichmainuseisinproductionofNPK.DAPisalsosuitablefertilisertobeappliedforcashcropssuchas vegetables and tubers. There are also opportunitytocreatefurthervalueforproductionofhighnitrogen

fertiliser such as fertiliser grade Ammonium Nitratewhich could alsobe used to assist in thegrowth andmetabolicprocessesthatplantundergoes.

InvestmentinSOGIPcanbeexpandedintomanufacturingof other chemicals using the available petrochemicalsfrom nearby manufacturers such as methanol fromLabuan. Other products that can bemanufactured inSOGIPthroughthisrouteareothersolvents,biodieseland glycerine (for cosmetics and pharmaceuticalsindustry).

Support service industries like Centralised UtilitiesFacility (CUF), fabrication yards for pressure vessels,seacraftsandoffshorestructurearealsoplanned.Basicinfrastructure (road, drainage and port facilities) andutilities (electricity, water and telecommunications)willbemadeavailableatSOGIPforinvestorstoutilisein operating their businesses. Special tax incentivesareavailabletothebenefitsoftheinvestors.(RefertoChapter10IncentivesandPromotions)

Figure 5: Location of Sipitang and SOGIP

5.1.1 Advantages of Sipitang Oil and Gas Industrial Park

SIPITANG


SOGIP is to be developed as an integrated industrialparkdesignatedforoilandgasindustry.SOGIPhasthefollowingstrengthsasanintegratedindustrialpark:

TheavailabilityofnaturalgasfromoffshoreSabah Strong partnership between Sabah state and

PETRONAS Availabilityof4,065acresoflandfordevelopment Strategically locatednearbytomajorshipping lane

andcloseproximitytoLabuanandBrunei Sheltered bay and sufficient water depth (16m

25m) to cater for Single Buoy Mooring (SBM) forVeryLargeCrudeCarriers(VLCC)andavailabilityofvesselanchorage

OpportunityoftaxincentivestoSOGIPinvestors Minimalimpactonrelocationoflocalresidents Gascitygatewithintheindustrialparktee-offfrom

theSabahSarawakGasPipeline ProximitytotrunkroadthatconnectsSarawakand

BruneitoSabah Synergy between on-going SAMUR project and

SOGIPmasterplanwillconvertSOGIPintoafertiliserhub which in return provides opportunities forinvestorstocreatedownstreamindustries

ReadilyavailablemarketwhereagricultureisamajorindustryinSabah

ThelocationofSOGIPasshowninFigure5isidealforthedevelopmentofintegratedpetrochemicalcomplexesfocusingonagriculturalproducts,bio feed, renewableenergyandotherchemicalproductsforcosmeticsandpharmaceuticaluses.

5.1.2 Investment in SOGIP

It is expected that SOGIPwill bedevelopedover twophasesspanningfrom2014to2024(RefertoFigure8)withparticipationfrommultipleinvestors.

Phase 1A: Planned Investment by Investors

1. Fertilisers i. AmmoniaPlant ii. AmmoniaDerivatives iii.UreaDerivatives 2.BulkStorage i. BulkOilStorage ii. BulkRefinedPetroleumProductsDistribution

Terminal 3.OtherInvestments i. BioBasedIndustries ii. Fabrication (shipping, onshore and offshore

structures) iii.Refinery 4.Utilities i. CentralisedUtilitiesFacility(CUF) ii. GasReticulation

Phase 1B: Planned Development by SOGIP

1. Infrastructure i. RoadandStreetLights ii. Drainage iii.PortandJetty iv.Telecommunications

Phase 2: Planned Future Investment (Subject to

future availability of gas)

1. MethanolDerivatives 2.AmmoniaDerivatives 3.UreaDerivatives 4.OtherIndustries


5.2 Phase 1 SOGIP Development

5.2.1 Fertilisers

Fertiliserisakeyindustrythatsupportsglobalchallengein food production. The need for improvement infood production and quality create higher demand infertilisers.Bothdemandandsupplyforfoodisexpectedto grow rapidly for the next 20 years in linewith thegrowth of population. SOGIP aspires to providetotal fertilisers solutions to the agriculture industry,supportingSabahstateasthelargestproducersofpalmoil in Malaysia. Seven (7) value added products havebeenidentifiedforinvestmentwithinthisclusternamelyammonia, urea, NPK, ammonium nitrate, caprolactam,ammoniumsulphate,anddiammoniumphosphates.

Spearheading SOGIP development is the currentlyongoing construction of SAMUR9. SAMUR projectwillcost approximately RM4.6 billion (USD1.5 billion) andwill produce about 1.2 million tonnes per annum ofgranulated urea.Once completed, SAMURwill be thelargest single traingranularurea facility inSouthEastAsia,transformingSabahintooneoftheregionslargestproducersoffertilisers.

Figure 6: Potential ammonia and urea derivatives to be developed

Ammonia

PowerGeneration

Methanol

Urea

AmmoniumChloride

Insufcient gas volumefor world scale plant

Oversupply of market

Power demand in Sabah islimited100mmscfd = 600 MW

ethance volume is not sufficient to develop ethylene and derivatives complexUF - Urea Formaldehyde

Note :

AmmoniumNitrate

DiammoniumPhosphate

AmmoniumSulphate

Caprolactam

Fertilizer :agriculture

Fertilizer :palm/rubber

Fertilizer :cash crops

Articialbre

NPK

Mela-mine

UF

MethaneRich

NaturalGas

Fertilisersfromthisfacilitywillbeexportedtolucrativeoverseasmarkets. However, a sizeable volumewill bemadeavailable toserveSabahstates rapidlygrowingagriculturalsector.

Anewammoniaplant isalsobeingplanned inSOGIPslated to be commissioned in 2018. The investmentof new ammonia plant is expected to bring GrossNationalIncome(GNI)ofapproximatelyRM646millionbyyear2020.Theproductswillbeusedas feedstockforammoniaderivatives,which inturnwillbeusedasfertilisersforcashcrops,tubers,paddyandpalmoil.

The investment in ammonia derivatives productionsuch as caprolactam will potentially pave way tofurther downstream products such as Nylon 6 whichsubsequently lead to the growth in textile andengineeringplasticindustryinSabahstate.

The future investment opportunities for fertilisersindustry inSOGIPare inAgrochemicalsandEnhancedEfficiency Fertilisers. Agrochemical products suchas herbicide and pesticide, and Enhanced EfficiencyFertiliserssuchascoatedfertiliserswillprovidefurthersolutiontotheagricultureindustry.

9Source:PETRONASChemicalsGroupBerhad


5.2.2 Gas Distribution

A joint venture company between Sabah EnergyCorporation(SEC)andPETRONASGasBerhad(PGB)iscommittedtoprovidegasdistribution infrastructurewith a total investment estimated to be aroundRM4080million.Withthisinfrastructure,SMIinSOGIPcanleverageontheavailabilityofnaturalgasfromthenearest tee-off point at the gas distribution network(pipeline).

Total of 15 mmscfd of natural gas will be allocatedascatalyst for the SMI especially in the areas ofwaste treatment and incineration, metals preheating(particularly for iron and steel), drying anddehumidification, glass melting, food processing andfuellingindustrialboilers.

5.2.3 Bulk storage

Bulkstorageterminalforbothcrudeoilandpetroleumproducts are potential investment opportunities inSOGIP.

Annually,anestimated420,000barrelsofcrudeoiland730,000barrelsofpetroleumproducts(refertofigure7)areconsumeddailyacrossAsia.PetroleumproductimportsandexportsforChina,IndiaandSoutheastAsiaareexpectedto increaseby1.8millionbarrelsperdayfrom2010to2020.Theimplicationsonoilstoragearetwo-fold10;

1. Thecontinuedgrowthindemandforenergyinthisregionwilldriveaneedforincreasedstoragecapacityofcrudeoilandrefinedpetroleumproducts.

2. Increased inflowof crudeoil fromAfricaandLatinAmerica would result in longer transit times andtranslate into a need for larger buffer storage ofcrudeoil.

With close proximity to major shipping routes, landavailabilityanddeepwatermarineaccessibility,Sipitangiswellpositionedforoilstorageterminals.

Distributionofrefinedpetroleumproductssuchasdieselandgasolinetonearbyareasarenotcurrentlyavailable.Hence, thebulk storage facilitywill also function as adistributionterminalinSOGIP.

10EconomicTransformationProgramme(ETP)

5.2.4 Refinery

Subject to future economic feasibility study anddependingonmarketdemandoftherefinedpetroleumproducts, a refinery to process crude oil will beconsideredinthefirstphase.

Intheareaofoilrelatedinvestment,arefinedproductdistribution terminal is a value added operations tobeincludedinSOGIP.Thisterminalwillservethelocaltransportationoperationsbyprovidingdiesel,gasoline,JetA1,keroseneandmarinefueloil(MFO)forbunkeringoperations.

5.2.5 Other Investments

Other investmentsthatrequireminimalgasvolumeaspart of the manufacturing process will be assessed.These potential investments must satisfy all the pre-requisitesasdepictedintheguidingprinciples.

In the case of bio based industries, bio-protein feedmanufacturing has been identified. It uses naturalgas as fuel and feedstock tomanufacture amino acidbased protein product suitable for use within SabahandMalaysia.Thebio-protein ismixedwithfibresandminerals for use as animal feeds which supports SMIindustryinSOGIP.

Marineservices,shipbuildingsandrepairs,onshoreoroffshore structure fabrication bode well into SOGIPMasterPlanbecauseoftheaccessibilitytothevariousoilandgasoperationsinEastMalaysia.

SMI has potential to be developedbased on requiredsupport and services for the fertilisers hub such astechnology driven industries such as packaging,warehousing, logistic, ICT service (refer to Chapter 7,section7.2).


5.3 Phase 2 SOGIP Development

Subjecttothefutureavailabilityofgas,phase2SOGIPdevelopment will focus on methanol derivatives,ammonia derivatives, urea derivatives and otherindustries.

5.3.1 Offshore and supply base servicesSOGIP is an ideal location for offshore structuresfabricationandrepairsoffloating installation.Sipitangis blessed with sheltered bay and it is accessiblethroughouttheyear.

Withhighexpectationoninvestmentsandestablishmentof port facilities in SOGIP, there is a potential for afabricationyard tobesetupandprovideengineeringand construction services. Sabah is surrounded byoffshoreoilfieldswhichmakeitfeasibleforSOGIPtobeanothersupplybasecomplementingLabuan.

Average transittime (days)

10.9 14.3

2005 2010

41 32

55

23.7

21.6

19.5

2015

Regional Arab Gulf Europe/Africa/Med

LatinAmerica

Growth rateof 420 kbdper year

Asias appetite for crude oil is continuing togrow at 420 kbd per year Asias crude sypply will take longer to arrive

Comparison of crude supply distributionGrowth in Asia crude consumptionMillion barrels per day Percent of Asia crude oil source

+2.1

+2.1

53

20052015

315

1 2

Distance to Asia

Source: ETP Report Figure 7: Growth in Asia Crude Consumption & Comparison of crude supply distribution

5.3.2 Marine services - Ship Fabrication and Repairs

SOGIP location issuitable forshipbuildingandrepairsoperations due to its access to shipping routes andshelteredbay.

Shipandsupplyvesselsrefurbishmentandrepaircanbeeasilycarriedoutduringmonsoonseason.


11B10standardis10percentpalmbiodieselwith90percentpetroleumdiesel.

5.3.3 Bio and Renewable Energy Biotechnology Research Centre

WiththeproposedimplementationoftheB10standards11,biodieselindustriesshouldbeindemandfrommid-2014.B10standardrequirementproposesretaildieseltoincorporate10%ofbio-diesel.

Thismoveisproposedtoreducethedependencyoffossilfuelsandalsotoencouragethedevelopmentofthebiofuelsindustries.

Bio-dieselproductionrequiresmethanolandpalmoilasfeedstocks.MethanolisavailablefromLabuanandpalmoilfromtheareasurroundingSipitang,makingthisanideallocationforcentraliseddevelopmentofbiofuelstechnology.Aby-productofthisprocessisglycerinewhichisagoodbaseformanypharmaceuticalandcosmeticproducts.


PETROCHEMICAL & FERTILISERS

INDUSTRIES

Phase 1

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Phase 2

BULK STORAGE & HEAVY INDUSTRIES

SUPPORTING INDUSTRIES

UTILITIES & INFRASTRUCTURE

MARKISA (Ammonia Plant)

Ammonia Derivatives

Urea Derivatives

Methanol Derivatives

Bio-based Industries

Bulk StorageBulk Products Distribution TerminalOli RefineryFabrication YardShip Repair Services

TransportationWarehouse (Storage Facilities)PackingPrintingSMI

Road, Streetlights & DrainageElectricity, Water & ICTCentralised Utilities Facility (CUF)Gas ReticulationPort & Jetty

Phase 1Phase 2Phase 3Phase 4APhase 4B

Figure 8 : SOGIP Development Plan


LAYOUT PLANNING


6.0 LAYOUT PLANNING

Figure 9: Layout Planning of SOGIP

Conceptually,SOGIPwillattractavarietyofinvestmentsindifferentmanufacturingandoperations.Someoftheoperationsincludehazardousandtoxicmaterialswhichrequire special handling. Therefore, zoning criteria isdevelopedbasedonthefollowings:-

a. Safety consideration (flammable, toxic andexplosivenessofmaterials).

b. Logicallayoutofmanufacturingoperationstoreducepipingruns.

c. Reduce traffic congestion and unnecessarymovementswithintheparklimitbyclusteringrelatedindustries.

Landsizecanbecustomfittoinvestorsneedtooptimisethelandusage.

Sea front land parcels are reserved for specialrequirementsuchasportfacilities,marineandoffshoreservicesandsupplybase.


SUPPORT SERVICES PLANNING

Photo source :http://commons.wikimedia.org


7.0 SUPPORT SERVICES PLANNING

7.1 Support Services Planning in Sipitang

SOGIPwillbesupportedbyexternalcommonfacilitiesand supporting services to complement the park andbeneficial to Sipitang development. These facilitiesinclude:

OfficeComplexes Housing Hospital SchoolsandTrainingCentres CommercialComplex Security FireFighting

With the availability of these facilities, SOGIP willbe fully supported as an industrial park. SOGIP willdirectlyor indirectlycarryout itscorporateandsocialresponsibilitiesfortheemployeeswithinSOGIPandforthepeopleofSipitangdistrictaswell.

7.2 Support Services Planning in SOGIP

With several clustersof industriesbeing set-upwithinSOGIP, ranging from oil refinery and petrochemicals,number of supporting services has been identified inorder to support theoverall functionof the industriesandSOGIPasawhole.Listofpotentialservicesareasbelow:

Packaging o Packaging of products that are produced in

SOGIP. Printing o Labelling of end products for identification

purposes. TransportationServices o For transporting or delivering raw materials,

finishedgoodsorotherproductstodestination. WarehousingFacilities o Asabaseforstorageofproducts,dryandbreak

bulkandothermaterialsbeforedelivery.

Competitiveness of SOGIP shall be enhanced bydevelopmentof identifiedinfrastructuresandfacilities.Theplannedcentralwarehousingfacilitieswillsupportthe investment in SOGIP in rawmaterial and producthandling,storageanddistribution.


Acentralwarehousingfacilityisnecessaryforthestorageof certain products that are required by the industryusersbefore it is transportedoutofSOGIP.TherearetwotypesofwarehousesthatwillbemadeavailableinSOGIPtocaterforthedifferenttypeofgoodsproduceorimportedbytheuseroftheindustrialpark;warehouseforhazardousgoodsandnon-hazardousgoods.Thereareseveraltypesofhazardousgoods,whichare:

o GaseousMaterials o InflammableLiquids o InflammableSolids o Materials containing peroxides, easily oxidising

contents o Substanceshighlytoxic o Radioactivesubstancesandmaterials o ErosiveMaterials o Other hazardous materials and substances

miscellaneousinnature o Safetymanagement system is to be in-place in

managingthewarehousewhichholdshazardousgoods.Hence,segregation forhazardousgoodsand non-hazardous goods is crucial in ensuringthesafetyoftheproducts.

ScheduledWasteManagement o HandlingscheduledwastewithinSOGIP. o Scheduledwasteshallbecollectedanddisposed

bygovernmentapprovedserviceprovider.SOGIPis exploring the possibility of providing theservices.

o Scheduledwastesareexemplifiedaswastesoratotalcombinationofwastesthathasasignificantpresent or possess conceivable hazard to thehealth of humans and living organisms. Thisexcludesmunicipalwasteandmunicipalsewage.Scheduled wastes are broadly defined into thecategoriesofchemicalwastes,biologicalwastes,explosivesandradio-activewastes.

o Scheduledwasteshallbecollectedanddisposedby a government approved service provider.SOGIP is exploring the possibility of providingtheserviceswithintheIndustrialParkastoavoidillegalwastedumpingaswellastomaintaintheeco-system.


HumanResourceTrainingFacility o AcentretoconductandprovidehumancapitaltrainingfortheindustrieswithinSOGIP.

ICTServices o ProvidetelecommunicationsandbroadbandnetworkservicesinSOGIP.

BondedArea o Toincreaseinterestsfrominvestors,SOGIPplanstohaveabondedareaarounditsvicinity.Theavailability

ofbondedareaistofacilitateincreaseimportgoodstoSabahwhichwillresultinthepossibilityofcreatingbusinessesforthelocalsandSOGIP.

HelipadFacilities o HelipadfacilitieswillbeplannedwithinSOGIPforemergencyusesandasalternativetolandtransportation.


Kertih Integrated Petrochemical ComplexKertih IPC principally consists of ethylene-based petrochemical plant and the plants are integrated with common shared infrastructure facilities and process plants.

CHAPTER 8

INFRASTRUCTURE PLANNING


8.0 INFRASTRUCTURE PLANNING

In order to enhance the development of SOGIP, anintegratedplanningofinfrastructureisrequired.Amongthe facilities that would be beneficial to the overalldevelopmentoftheindustrialparkare:

Roads PortsandJetty LandandSitePreparationLandArrangement Othercommonfacilities(telecommunications,etc.)

8.1 Roads

TheroadnetworkwithinSOGIPwillbeofanindustrialstandard to cater heavy machineries and lorries thatwouldfrequenttheindustrialuserspremise.Pathsandtypesoftheroadsshallabidetotheindustrialstandardsaswell.Theconnectivityandlinkagesshallbedesignedin a way to provide minimal congestion and betteraccess for the industrialusers inboundandoutboundtransportationinSOGIP.

Asinglecarriagewayofanindustrialstandardshallbeconstructedtocaterforthemovementofgoodsorrawmaterialsbyprimemoversandlorrytrailersthatwouldbe transported to SOGIP.However, there is a needoffutureexpansionfordualcarriagewayinSOGIP.

8.2 Port and Jetty Facilities

For SOGIP, a portwill be planned for cargo handlingand process of goodsmovement by ocean freight tocater forthe industryusers.Theport facilitiessuchascranes,loadingarmsandcargostoragewillabidetotherequirementoftheusersproducttypeandoutput.

AmultipurposejettyisrequiredfortheoveralluseandoutboundofproductsfortheusersofSOGIP.Basedontheoutputandrequirementsoftheindustryusers,thismultipurpose jettywouldprovideshipdockingfacility,loadingandunloadingofcargoandotherfacilitiessuchastheconveyorbelt.

Themanagement andoperationof theport and jettywill be outsourced to third party e.g. SabahPort SdnBhd.

8.3 Land and Site Preparation

8.3.1 Site Preparation

Basic infrastructures to support the site preparationsuchasaccess roads,drainageandstreet lightingwillbe developed within SOGIP. Investors will undertakethesiteclearing,earthworksanddeveloptheselectedplot of land within their respective boundary limit.Sinceoilandgasdownstreamindustriesutilisesheavymachineries and equipment, the sitemay need heavydutyreinforcementorpiling.Withthisregards,investorsshallbeabletodeveloptheselectedareaaccordingtotheirrespectiveneeds.

8.4 Land Allocation Process

AstructuredregistrationprocesswillguideinvestorsinacquiringorleasingthelandrequiredforinvestmentinSOGIP.Thefollowingarerequiredforregistration:

Aprojectdescription Aproject socio-economic feasibility study to show

thattheprojectwillhavepositivecontributiontotheSabahState

Fulldisclosureofshareholders Thecompanyobjectivesandbusinessplan The company governance policy and organisation

structure Financialplantosupporttheproject

Uponsubmissionofthisinformation,SOGDCwillevaluatetheviability,strategicfitofthebusinessandalignmentto the overall SOGIP master plan. Once evaluation iscompleted,SOGDCwillissuealetterofofferstatingtheinitialconditionstothepotentialinvestor.

ThefinallandallocationwillbedeterminedaccordingtoSOGDCprevailingpolicy.


UTILITIES PLANNING


9.0 UTILITIES PLANNING

9.1 Centralised Utility Facilities (CUF)

Figure 10: Comparison between common concept and centralised utility concept

Astheindustrialparkowner,SOGIPplanstosetupaCentraliseUtilityFacilities(CUF)whichwillprovideaddedadvantagestotheinvestors.Takingtheadvantageofeconomicofscale,CUFisproposedtosupportthedevelopmentoftheindustrialpark.Inadditiontoareliablesupplyofutilities,otheraddedadvantagesare;

LowerinitialCAPEXinvestmentfortenants Optimisationofproductioncostbyreducinganyduplicationofequipmentandmanpower Betterfocusontotheircorebusiness

WasteWaterTreatment

DemineraliseWater

IndustrialGasses

CoolingWaterSteamElectricity

ListofUtilities:


9.1.1 Electricity and Steam

Taking intoconsiderationofaddingmorevalue to thenaturalresources,CUFwillbegeneratingelectricityandsteamusingCombineGeneration(COGEN)system.

Acknowledging the importance of stable and reliableelectricitysupplyforoilandgasindustries,SOGIPwithitspartner,PETRONASGasBerhad(PGB)shallensureelectricitysupplywillbestableandreliable.PGBhavemore than 10 years of experience operating CUF inKerteh,TerengganuandGebeng,Pahang.

To increasethereliability,connectiontoSESBgrid forstand by supply is essential. It is expected that thedemand for electricity by the industries in SOGIPwillbeat118MWinthenextfiveyears.SESBisplanningtoconstructanew275kVtransmissionlinefromKimanistoSipitangascurrentlythetransmissionlinethatisavailableis33kVwhichisnotsufficientforSOGIP12.AsthisispartofSESBsmasterplanforSabah,implementationofthisproject will be implemented sooner or later but only

subject to the availability of funding.With this, SESBrequiresa landsizeof40acres for its substationandPMU.

Anotheressentialutilityinindustrialoperationissteamdue to its vast usage in industries; i.e. sterilisation,cleaning,moulding,pipeandvesseljacketing.GeneratedfromtheCOGENsystem,steamshallbemadeavailableto SOGIPs tenant with significantly small CAPEXinvestment(mainlyforthepipeline)comparedtoself-generation. Centralising the production of steam willalsoeliminate theneed foreachtenant to fulfilDOSHrequirement.

9.1.2 Waste Water Treatment

Protecting the pristine and precious Sabahs naturalenvironment, waste water treatment is very crucialto reduce the impact of industrialisation towardsenvironment.CUFshallprovidetheservicetotreatthewastewaterbeforedischargingit.

12SabahOilandGasDevelopmentLabReport


9.2 Water Supply

Currently, there are two (2) sources of water supplyservicingSipitangwhichareMesapolwater treatmentplant and Kampung Ulau water treatment plant bothgenerating 4 MLD and 15 MLD respectively. By thefirstquarterof2014,anewwater treatmentplantwillcompletedwiththecapacityof40MLDwhich27MLDwillbecateredforSAMUR.

By2017,thedemandforwatersupplyinSOGIPwillbeat91.2MLDandbythefollowingyearandonwardsthedemandwould increaseto 111.2MLD.Withthesehugedemands being needed, a newwater treatment plantmust be constructed to supply to these industriesin SOGIP. As of now, the SabahWater Department ispreparingaproposaltoconductastudyonanewsourceof water supply for Sipitang district which includes astudyontheenvironmentalimpactandclimatechange.

9.3 Telecommunications

A high speed telecommunication network isplanned for SOGIP. A private entity will provide thetelecommunicationservices for thevariousoperationssuchas:-a. High speed fibre optic network for voice call and

computercommunicationb.Network for security surveillance to protect high

valueinvestments


PutrajayaLocated 25km south of Kuala Lumpur, it serves as an administrative centre of Malaysia.

CHAPTER 10

INCENTIVES & PROMOTIONS

Photo source :http://www.puim.my


10.0 INCENTIVES & PROMOTIONS

10.1 Incentives

Incentivesareanimportantfactorinattractinginvestorsintotheindustrialpark.

On 1stNovember 2012, Federal Treasury has approvedthefollowingblanketfinancialincentivesfortherelevantactivitiesinSOGIP.

ThefollowingincentivepolicyappliestoallapplicationsreceivedbySEDIAupuntil31stDecember2020.

Manufacturing (Downstream activities)

Medium&heavyindustries Urea&ammoniaproduction Solarglass Shipbuilding&repairs Marinesupplybase&fabricationyard Ironorepelletizing Hotbriquetteiron Combinedcyclepowerplant

Fullincometaxexemptionforaperiodof10years;or100%investmenttaxallowance(ITA)

100%ofeligibleexpensesincurredanddeducted100%ofstatutoryincomeforaperiodof5years(subjecttotheproducts/activitiespromotedunderthePromotionofInvestmentsAct1986)

Shipbuildingandshiprepairindustry Fullincometaxexemptionforaperiodof5years;or

100%investmenttaxallowanceincentive(ITA)ofeligibleexpensesincurredanddeducted100%ofstatutoryincomeforaperiodof5years

For landdevelopmentpurposes, investorswhoareeligibleforfacilitationfundcanapplythroughUKAS(PublicPrivatePartnershipUnit)foracertainamountofcompensationforthelanddevelopmentcost.


Figure 11: Promotional Programmes in SOGIP

InvestmentOpportunitiesProgramme

Objective

To promote SOGIPto attract domesticand foreigninvestors

To promoteemploymentopportunities inSOGIP

To promotebusinessopportunities inSOGIP to localbusiness owners

Identify list of business opportunities in SOGIP

Create a platform for businesses to registertheir company profile

Advertise tenders via various platform,website, magazines and local newspapers

Organise talks and road shows at schools andlocal universities, training academies &institutions

Advertise in social media, website,newspapers and magazines

Employment tolocal Sabahan

Provideopportunies forlocal contractors toparticipate incontracts derivedfrom SOGIP

Utilise social media and website as a platformfor investors to register interest

Increase theinvestment inSOGIP

Provide income toSOGIP

Participate in state, national and internationallevel conferences and seminars

Activities to be done Benefits

EmploymentOpportunitiesProgramme

BusinessOpportunitiesProgramme

1

2

3

10.2 Promotions

ThereareanumberofpromotionalprogramsthatSOGIPhavecomeupwith.Theyare: InvestmentOpportunitiesProgram EmploymentOpportunitiesProgram BusinessOpportunitiesProgramEachoftheprogramshasitsownfunctiontorealiseSOGIPsambitiontopromotetheindustrialparkaswellastoperformitscorporateandsocialresponsibility(CSR)forthestateofSabah.Thefigurebelowshowstheobjectives,activitiesthatwillbedoneandthebenefits.


Otherthanorganisingitsownconference,seminarandexhibitions,SOGIPwillalsorideonpromotionalactivitiesbytheFederalandSabahstateagenciessuchasMITI,MIDA, MATRADE, MID, MPRC and SEDIA in order topromoteSOGIPlocallyandabroad.

SOGIPneeds tocreate its corporatewebsite toeasilydisburseinformationtopotentialinvestorsintendingtoaccumulateinformationonSOGIP.


IMPACTS & BENEFITS TO SABAH STATE

Photo source :http://www.mymalaysiabooks.com


11.0 IMPACTS & BENEFITS TO SABAH STATE

SOGIPisanintegratedindustrialareadesignatedforoilandgasrelatedindustry.Thisindustrialparkwillprovideseveral impacts andbenefits to the stateof Sabahasthefollowing:

1. CreationofjobopportunitiesforSabahans.2. Economic spin off to spur further downstream

activities.3. Attract foreign direct investments and facilitate

technologytransfer4.BringdevelopmentintoSipitangandnearbydistricts

i.e.Beaufort,TenomandKeningauthroughspillovereffects.

5. ReduceSabah importsof fertiliser tosupport localagricultureindustry.


SOGIP DEVELOPMENT

PLAN


12.0 GOVERNANCE STRUCTURE

SOGIPisthefirstdedicatedoilandgasindustrialparkinSabah.SOGIPwhichshallbemanagedbyaprofessionalpark developer will be a liaison to various governingbodies andagencies. In addition, SOGIP shall supportinvestorstoestablishtheirbusinessintheindustrialpark.Aneffectivegovernancestructure iskey forSOGIP toachieveitstaskefficiently.

12.1 Proposed Governance Structure

Compliance to states statutory requirements is theinitialstepsforestablishingabusinessinSOGIP.ListofapprovalsforthevariousregulatoryrequirementsasperAppendixI.

SOGDC has envisioned a one stop centre concept toserviceandaiditsfutureinvestorsforapprovalprocess.

CurrentlySOGDCownsSOGIPandisalsoresponsibletomanageandmarketthe industrialpark.SOGDCscopeis not designed for statutory requirements approvalandthereforeaonestopcentreisneededtoexpeditecompliancewithstatutoryrequirements.Figure13istheproposedgovernancestructuretorealisetheonestopcentreconcept.

Figure 12: Proposed Governance Structure

WiththenewstructureSOGDCwouldbeanintermediatebody that will expedite statutory requirements forinvestors within SOGIP. In the new SOGDC will bechairedbytheChiefMinisterofSabahandconsistoftopgovernmentofficial.Thebodydoesnotoverridecurrentpowersofrespectivestatutorybodiesbutactasenablerforstatutoryrequirements.

SOGIPwillbeincorporatedanddesigntocatersolelyonSOGIPdevelopmentwhilstpolicymatterwillbehandledbySOGDC.ThusSOGIPwillbetheonestopcentreforthe investors and any regulatory approval would besubmittedtoSOGDCforacceleratedapproval.


12.2 Statutory Requirements

As an industrial park related to Oil & Gas and heavyindustries there are several statutory requirementsthat need to be observe. Statutory requirements arelegal requirements set by local authorities to engagein a particular activity. Failure to comply with theserequirements will result in legal directive to ceaseactivity. Statutory approval may be in the form ofofficialapproval,license,registrationorpermit.Itshouldbe noted that certain statutory requirements wouldinfluencetheindustrialparklayout.

12.2.1 Initial Statutory Requirements

FortheinitialdevelopmentofSOGIPthemainstatutoryrequirementwouldfallundertheEnvironmentalQualityAct(EQA)1974.Underthisacttheregulationthereunder,industrialactivitiesarerequiredtoobtainthefollowingapprovals from the Director General of environmentqualitypriortoprojectimplementation:a. EnvironmentalImpactAssessment(EIA)b.Sitesuitabilityevaluationc.Writtenpermissiontoconstructd.Written approval for installation of incinerator, fuel

burningequipmentandchimneye. License to occupy and prescribed premises and

prescribedconveyances

Figure 13: SOGIP Organisational Chart

The initial EIA would also serve as a global EIA forinvestor pertaining to management of earthworks.However it should be noted that earthwork activitiesby investors involvingmore than40,000cubicmetricwouldrequireanindividualEIA.

12.2.2 Industry Specific Statutory Requirements

There are two main regulatory bodies pertaining toenvironmentalissue.ThesebodiesaretheEnvironmentalProtection Department (EPD) and Department ofEnvironment (DOE). EPD is a state department thatis responsible for the approval and managementof earthworks. DOE is a federal department that isresponsible for the assessment and approval of theprocessengineeringworks that isnormallyassociatedwith investors facilities. In addition to environmentalstatutoryrequirementsthereareotherrelatedstatutoryrequirements that would be relevant to the investorswithinSOGIP.

Inorderforabusinessentitytolegallystartoperatingitbusinessesseveralstatutoryneedstobecomplied.Thiscompliancewillbeintheformoflicensing,whichcouldbe a general licence, an industry specific licence oractivityspecific licence.Business licencesarerequiredbylegislationandadministeredbyvariousgovernmentagencies,statutorybodiesandlocalauthorities.Businesslicencescouldbecategorisedunderthreecategories.


1. General Licences

General licences are a requirement and shall beapplicableoncetheinvestorhasdecidedtoincorporateacompany.Listofgenerallicenceareasfollows: CompanyRegistration CompanyandEmployeesincometaxregistration EmployeeProvidentFund SocialSecurityOrganisation HumanResourcesDevelopmentFund

2. Sector Industry Specific Licence

This type of licence is industry specific. Examples oftheselicencesareasfollows: ManufacturingLicence TelecommunicationLicence BroadcastingLicence OilExplorationLicence

3. Activity Specific Licences

Activity Specific Licences are licences to regulate aparticularactivity.Thesetypeoflicencerequiresinvestortocomplywithasetsofspecificguidelinesdesignedtoprotect the interestof thecitizen,employment,safetyofworkers,environmentandgeneralpublic.Examplesofthelicencesareasfollow: CertificateofFitnessforCertifiedMachinery ApprovalforExpatriatePost Approval to install/resite/alterAirPollutionControl

Equipment(BagfilterandChimney) BuildingPlanApproval SalesTaxLicence

In addition to general business licence and the basicapproval from the Director General of EnvironmentQuality under the EQA 1974, investor may need toadheretootherstatutoryrequirementsthatarerelevantto their respective industries. The possible relevantstatutoryrequirementsforindustriesareasfollows:a. WrittennotificationtoDirectorGeneraltocarryout

work on solidwaste transfer station or land fill, orconstruct on land any facility or building thatmayproduceleachate

b.WrittennotificationtoDirectorGeneralonchangesof industrial activities thatmay causedischargeofeffluentormixedeffluent

c.Complywithgaseousemissionregulationd.Stack Gas Emission Standards from Environmental

Quality(CleanAir)Regulations1978e. Recommended Air Quality Guidelines (Ambient

Standards)f. SewagedischargeStandardsg.Industrialeffluentsdischargelimits

h.Leachatedischargelimitsi. ProhibitionsonOzoneDepletingSubstance(ODS)j. Environmental Quality (Schedule Wastes)

Regulations2005k. Environmental Quality (Prescribed Conveyance)

(ScheduleWastes)Order2005l. Environmental Quality (Prescribed Premises)

(ScheduleWastesTreatmentandDisposalFacilities)Order1989

m.Environmental Quality (Prescribed Premises)(ScheduleWastesTreatmentandDisposalFacilities)Regulations1989

n. Customs(ProhibitionofExport)Order(Amendment)(No.2)1993

o. Customs(ProhibitionofImport)Order(Amendment)(No.2)1993


SOGIP KEY SUCCESS FACTOR


13.0 SOGIP KEY SUCCESS FACTOR

InsupportingtheimplementationofthisSOGIPmasterplan, the following key success factors have beenidentified:-

i. AvailabilityofFunds Federal and State Governments support in

providing funds for infrastructure developmentasatippingpointtobridgeprojectviabilitygap

SOGDCsbusinessmodelneedtobesustainabletocaterforfutureexpansionoftheindustrialpark

ii. FinancialIncentivesforInvestors The Ministry of Finance had approved tax

incentives to be listed under the SabahDevelopment Corridor. The approved incentivesunderSOGIPisFulltaxexemptiononstatutoryincomefor10years;orInvestmentTaxAllowancesof 100% on qualified capital expenditure for 5years

iii.HumanCapitalDevelopment Humancapitalprogrammesandtrainingcentres

are required to be built government to ensureanadequatesupplyofqualitymanpowerfortheindustry

iv.CentralisedServiceConcept Centralised provisioning of inputs, utilities and

services reduces investment requirement forindustryplayersaswellasoperatingcost forallinvestorsacrossSOGIP,makinginvestmenteasy.

v. EfficiencyofInfrastructure Dedicatedinternalinfrastructureintheindustrial

park such as roadways, ports, electricity, watersupply,telecommunicationandetc.

Port facility development planned toaccommodate both traffic and vessel types (ie.VLCCs)

vi.OneStopServiceCentre OneStopServiceCentreforallgovernmentaland

logisticalfunctions


APPENDICES


List of Authority

Bil. Authority State of Sabah Federal

1 PejabatKetuaMenteriSabah

2 MajlisDaerahSipitang(MDS)

3 PejabatDaerahSipitang

4 JabatanPerancangBandarDanWilayahNegeri

5 JabatanKeselamatanDanKesihatanPekerjaan(DOSH)

6 JabatanBombaDanPenyelamatMalaysia(BOMBA)

7 SabahElectricitySdnBhd(SESB)

8 SuruhanjayaKomunikasiDanMultimediaMalaysia(MCMC)

9 JabatanPenerbanganAwamMalaysia(DCA)

10 TelekomMalaysia

11 SIRIM

12 JabatanAlamSekitar(JAS)

13 JabatanPerlindunganAlamSekitar(JPAS)

14 JabatanKastamDirajaMalaysia(JKDM)

15 JabatanKerjaRayaSabah(JKR)

16 LembagaPerlesenanTenagaAtom(AELB)

17 JabatanAirNegeriSabah(JAS)

18 JabatanPengairanDanSaliranSabah(JPS)

19 JabatanKesihatanNegeriSabah(JKNS)

20 JabatanTenagaKerja(JTK)

21 SuruhanjayaTenaga(ST)

22 CIDB

23 JabatanImigresen

24 JabatanPengangkutanJalan(JPJ)

25 JabatanTanahDanUkurNegeriSabah(JTU)

26 LembagaPelabuhanDanDermaga(JPDS)

27 LembagaPelabuahan-PelabuhanSabah(LPPS)

28 JabatanLautMalaysiaWilayahSabah(JLM)

29 PolisDirajaMalaysia(PDRM)

30 StateEconomicPlanningUnit(EPU)

31 JabatanPerhutananSabah(JPHT)

32 MinistryofConsumerAffair

33 MinistryofFinance(MOF)

34 JabatanKeselamatanKerajaanMalaysia,JabatanPerdanaMenteri

35 MinistryofTradeandIndustryMalaysia

36 MalaysiaInvestmentDevelopmentAuthority(MIDA)

37 JabatanHasilBumiNegeriSabah

38 PenolongPemungutHasilTanah(PPHT)

39 JabatanHalEhwalAgamaIslamNegeriSabah(JHEINS)

40 JabatanPertanianSabah(PersatuanPeladangDaerahSipitang)

APPENDICES

I. Governance Structure


ACKNOWLEDGEMENTS


ACKNOWLEDGEMENTS

The SipitangOil & Gas Development Corporation (SOGDC) teamwould like to thank the staff of PETRONAS,InstituteforDevelopmentStudies(Sabah),PEMANDUandMalaysiaPetroleumResourcesCorporation(MPRC)whoassistedinpreparingthisMasterPlan:

Company Names

Malaysia Petroleum Resources Corporation MohammadFadhliJamaluddinDimpleA/PKerisninJustinChiaJuSian

PEMANDU MohdTaufikAbdMujib

PETRONAS PETRONAS Chemicals Group Bhd.AAzizOthmanJamuriZenNorizanYahayaFadzilatunAhmadJohanAriefIbrahimMZameerZahurHussain

PETRONAS Malaysia Gas Management and Petroleum Management UnitFaizalMydinPitchayAhmadJohariJaffarKarenTonySulilMajangkimKuNorAzmiraMRoslimNoorAzlinaMorad

PETRONAS Gas Bhd.FairuzRoslanAMufashshalRoslinFarihHamshiMFatmi

PETRONAS Sabah Labuan Regional OfficeJulitaOntolRoslanAhmadNordin

IndustryAdvisorSOGIP DrChuahChenHeng

InstituteforDevelopmentStudies(Sabah) JoeAngChangLeongJulianaP.J.RinggingonMohdAzmirRamli


ABBREVIATIONS


ABBREVIATIONS

CHIMAC ChemicalIndustryManpowerAdvisoryCommittee

PCG PETRONASChemicalsGroupBhd.

CUF CentralisedUtilityFacilities

PEMANDU PerformanceManagementAndDeliveryUnit

DOE DepartmentofEnvironment

PGB PETRONASGasBerhad

EIA EnvironmentalImpactAssessment

PETRONAS PetroliamNasionalBerhad

EPD EnvironmentalProtectionDepartment

PLC PETRONASLNGComplex

EQA EnvironmentalQualityAct

ODS OzoneDepletingSubstance

ETP EconomicTransformationProgramme

RCJY RoyalCommissiononJubailandYanbu

GDP GrowthDomesticProduct

SAMUR SabahAmmonia-Urea

JIC JubailIndustrialCity

SDC SabahDevelopmentCorridor

JTC JurongTownCorporation

SEC SabahEnergyCorporation

KBD ThousandBarrelperDay

SEZ SpecialEconomicZone

LPG LiquidPetroleumGas

SMI SmallMediumIndustry

M3/DAY Cubicmetreperday

SOGDC SipitangOilGasDevelopmentCorporation

MFO MarinFuelOil

SOGIP SipitangOilandGasIndustrialPark

MMSCFD MillionStandardCubicFeetperDay

SOGT SabahOilandGasTerminal

MTPD MetricsTonperDay

SSGP Sabah-SarawakGasPipeline

MPRC MalaysiaPetroleumResourcesCorporation

TSCF TrillionStandardCubicFeet

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