PCG renews RM8.39b heavy naphtha supply deal with Petronas unit, ensuring stable feedstock supply for aromatics operations.
PETRONAS Chemicals Group Bhd (PCG) has officially extended its long-standing heavy naphtha supply agreement with Petco Trading Labuan Company Ltd (PTLCL), a wholly-owned indirect subsidiary of Petroliam Nasional Bhd (Petronas). The renewed contract, valued at approximately US$1.88 billion (equivalent to RM8.39 billion), underscores the strategic partnership between PCG and PTLCL. The updated sale and purchase agreement (SPA) was executed through Petronas Chemicals Marketing (Labuan) Ltd (PCML), a fully-owned subsidiary of PCG, and is set to span from July 1, 2025, through December 3, 2028.
This renewed supply arrangement will continue to serve as a vital source of feedstock for Petronas Chemicals Aromatics Sdn Bhd (PCARO), a wholly-owned subsidiary of PCG, whose production systems are specifically designed to utilize heavy naphtha (HVN). The continuity of feedstock is considered critical to PCARO’s sustained operations, given the unique configuration of its processing facilities tailored to this input.
Due to the nature of the parties involved, the deal is classified as a recurrent related party transaction (RRPT). PTLCL is part of the broader Petronas Group, which is a major shareholder in PCG. Nevertheless, under Bursa Malaysia's waiver rules regarding RRPTs involving Petronas Group entities, the transaction is exempt from shareholder approval. PCG has highlighted that maintaining this internal supply chain helps avoid additional costs that would arise if heavy naphtha were to be sourced externally — media reports indicate that such a shift could lead to elevated premium charges and increased logistics expenses.
In compliance with governance practices, four directors on PCG’s board — Datuk Sazali Hamzah, Mazuin Ismail, Farehana Hanapiah, and Abang Yusuf Abang Puteh — all of whom are affiliated with Petronas, have recused themselves from participating in discussions and decisions regarding the transaction to prevent any conflict of interest.
After a thorough review, PCG’s board of directors and its audit committee concluded that the terms of the renewed agreement are fair and reasonable. They emphasized that the contract aligns with standard commercial conditions and does not disadvantage minority shareholders in any way. Furthermore, the company confirmed that the transaction will not result in any significant changes to its financials, including earnings, net assets, or gearing ratio for the financial year ending December 31, 2025.
This renewal reflects PCG’s commitment to securing essential raw materials under stable, long-term agreements, thereby supporting the group’s operational continuity and strategic alignment with its parent entity, Petronas.
