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Dear all,

I had prepared 11 questions for the upcoming Sixtieth Annual General Meeting of Hengyuan Refining Company Berhad (the Company) to be held at Nexus Ballrooms 1 & 2, Level 3A, Connexion Conference & Event Centre, Bangsar South City, No 8, Jalan Kerinchi, 59200 Kuala Lumpur on Tuesday, 28 May 2019 at 10.00 am. Free to comment and add your questions before I send these questions to Hengyuan IR on 20/5/2019.

Thank you

Refer to answer given to me on my last year questions 5&6:

Our purchases can range between 300,000 to 1 million barrels. The typical, crude prices are benchmarked against dated Brent, dated Dubai or crude oil official selling price. The final agreed price will include a premium/discount to the benchmark.

Question 1: Please mark/indicate crude oil agreed purchase price and date of purchase against the background Brent Oil Price (Jan-Dec 2018) show in Annual report 2018 page 34: Performance review 2018.

Question 2: Please explain how many of your crude oil agreed purchase prices are at premium or discount to the Brent Oil price benchmark and reasons for premium/discount?































Gross profit





Sales volume (million barrels)





Average sales price (USD/barrel)





Purchase volume (million barrels)




Brent oil average (USD/barrel)




Question 3: Refer unaudited quarterly report. Please give the purchases volume and average Brent oil purchased price for each quarter?

Question 4: If benchmark against PetronM quarterly Average Brent oil purchased price period Q1:Q2: Q3: Q4 of USD/barrel 67: 74: 75: 67. How Hengyuan quarterly Brent Oil average purchased performance: Underperform/over-perform and reasons why?

Bursa company announcement dated: 16 Jan 2019


Full Fund Release of USD66.40 million for the H2GEN Project. The H2GEN Project is undertaken to supply the refinery with 30 tonnes/day of hydrogen for hydro desulfurization unit#2 and the extractive desulfurization hydro-treating process to meet the 10ppmw sulphur specification. The H2Gen Project is expected to start up in September 2020 to coincide with the Euro5 gasoil legislated date.

Refer link: https://www.gasworld.com/big-to-begin-construction-of-second-h2-plant-/2016324.article

The ฿500m (Thai Baht) ($16m) investment will emphasise BIG’s role as Thailand’s largest H2 gas producer, supporting the growing industry, in particular, the petrochemical and refinery sectors. The H2 plant will be constructed using advanced technology from the US and will produce 12,000 tonnes of H2 per annum at full capacity. The plant construction is scheduled to complete in Q4 2019.

Refer annual report 2018:  Page 39: H2GEN reached a Final Investment Decision in November 2018 and is also well on schedule to complete on time. The Euro 5 Gasoil scope has been extensively reduced with considerable capital savings and the scope is now small enough to be managed”

Page 44: “During MTA 2018, we completed all tie-ins necessary for the H2GEN Project commissioning and startup. The Natural Gas supply was awarded to a local supplier and the term sheet signed in December. The project has been approved and was awarded to an EPCC contractor to design, procure, construct and commission the unit. First production is due by September 2020, in line with Euro 5 Gasoil Project specification date.”

Question 5: What is the necessary for an EPCC contractor when you can purchase H2 plant from many well established H2 plant suppliers? https://www.mahler-ags.com/hydrogen/hydrogen-production-plants/

Question 6: Please give project cost break down for this H2GEN EPCC contract and explain why total cost is USD66.4 million when BIG in Thailand only need an investment of USD 16 million for a slightly bigger capacity H2 plant?

Question 7: Please confirm by Q1 2020 Hengyuan able to produce Euro 4M & Euro 5M Mogas and by Sept 2020 Euro5 gasoil with no significant addition Capex for this Euro5 gasoil.

Bursa company announcement dated: 02 Nov 2018


Separately, the Board of Directors approved an increase in funding of USD76 million for the Euro 4M Mogas project (“Project”), bringing the total investment to USD211 million +/- 10%.

The additional capital expenditure will be used to expedite long lead and additional equipment for a larger scope of activities and to upgrade the Project to deliver refining capability for the production of both Euro 4M and future Euro 5M mogas specifications when required. HRC anticipates completion of the upgraded Project by Quarter 1, 2020.

Bursa company announcement dated:  16 June 2017:


The Euro 4M plant is an integrated complex, which has been designed to desulphurise the full range Cat Cracked Gasoline (CCG) produced by our Long Residue Catalytic Cracking Unit (LRCCU). The design uses a combination of hydro-processing and liquid-liquid extraction technology, commercially proven and licensed by reputable technology licensors. The plant will have a capacity of 1.15 million tonnes per annum. This investment ensures HRC is well placed to meet the Euro 4M mogas specifications mandated by the Malaysian regulatory authorities by 1 October 2018.The Euro 4M plant can be further upgraded to produce Euro 5M mogas when the specification change is mandated, which is expected to be from 2025 onwards. The Total Investment Cost for the project is USD135 million +/- 10 %

Question 8: Please explain why an upgrade from Euro 4M to Euro 5M mogas will cost another addition USD 76 million a 56.3% of total Euro 4M investment?

Question 9: Why invest now when Euro 5M mogas specification change is mandated, which is expected to be from 2025 onwards?

Refer answer given to me on last year question 41: Yes, Hengyuan can claim compensation from manufacturer, if manufacturer delivered later than committed delivery date in the contract

Question 10: Did Hengyuan claim any compensation for late delivery on Euro 4M project?

Bursa company announcement dated: 05 Sep 2018


The CAR Project is undertaken to ensure that the refinery’s emissions comply with the Clean Air Regulation (“CAR”) requirements mandated by the Malaysian regulatory authorities via the installation of air pollution control systems at the Long Residue Catalytic Cracking Unit and Plat-2, and an emission monitoring system on HRC’s flue gas stacks. The Total Investment Cost for the CAR Project is estimated at USD48 million.

Refer sustainable report 2018 Gas Emissions: HRC undertook an independent assessment conducted by SIRIM QAS International Sdn Bhd in February 2019 to verify the Company’s GHG emissions in 2018. The audit was successfully completed as per ISO 14064, with many positive observations highlighted, including the use of consistent GHG methodology, appropriate calculation methods, reliable raw data source and secured documentation.

In 2018, SOx emissions decreased by 38.9 per cent at 2,669 tonnes SOx-eq. as compared to 4,367 tonnes SOx-eq. Our nitrogen oxides (NOX) emissions of 414 tonnes in 2018 were 29.7 per cent less than 2017’s emissions of 589 tonnes.

Question11: Is Hengyuan current refinery’s emissions comply with the Clean Air Regulation (“CAR”) 2014? If complied then why need CAPEX of USD 48 million for CAR project?

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