KUALA LUMPUR, July 30 — State oil firm Petronas will start up the refinery within its US$19 billion (RM61 billion) petrochemicals complex in Malaysia at end 2017, the company told Reuters today, signalling a further delay in the country’s largest-ever infrastructure project.

A delay to the project in Johor could deal a potential blow to the economy of the Southeast Asian nation as well as local oil and gas services firms hoping for work on the massive complex.

A source familiar with Petronas’ business strategy told Reuters the project had been complicated by a need to secure water supplies as well as cater for proposed international partners.

Petronas had already put back the project from late 2016 to early 2017 in June and revised the final investment decision (FID) to the first quarter next year, citing state government problems in relocating villages and graves from the 2,000-hectare site, five times the size of New York’s Central Park.

“As a result of the revised FID date, the RAPID refinery is scheduled to be ready for start-up in Q4 2017 and the remaining plants within the complex is scheduled to be commissioned in 2018,” Petronas said in a statement to Reuters today.

This is about six months later than market expectations after local media had cited Petronas CEO Shamsul Azhar Abbas in June as saying the start date for phase one of the RAPID project had been pushed back to early 2017.

Delays in the project — a cornerstone of Prime Minister Datuk Seri Najib Razak’s Economic Transformation Programme aimed at doubling Malaysians’ incomes by 2020 — could slow an economy whose oil and gas sector makes up a fifth of GDP.

The complex is the largest single investment in Malaysia, and aims to grab a chunk of the US$400 billion global market for speciality chemicals used in products from LCD televisions to diapers.

Its location at the southernmost tip of the peninsula, just 10km from Singapore’s east coast, is part of a vision for a “Greater Singapore” energy trading hub that would rival competitors such as China.

“This massive project is getting more complicated as we move forward,” said the source, who declined to be named as he was not authorised to speak to the media.

“We will need to spend to secure the water supply and now parts of the project may need to be redesigned to cater for incoming project partners,” he added.

Petronas, Malaysia’s only Fortune 500 company, has signed heads of agreements with Italy’s Versalis SpA, Japan’s Itochu and Bangkok-listed PTT Global Chemical to build speciality chemical plants.

Germany’s Evonik also stepped in to the project after rival BASF — the world’s top chemicals group — pulled out after differences in business strategy. — Reuters