INTERNATIONAL BACCALAUREATE

EXTENDED ESSAY

ECONOMICS

TITLE:

“To what extent has PETRONAS Petroleum Integrated Complex (PPIC) ensured sustainable development of Kerteh,

Terengganu?”

CANDIDATE NAME : HASSIM, MOHD FAIZ

CANDIDATE NUMBER : 000592 – 133

CENTRE : MARA COLLEGE BANTING,

42700 BANTING,

SELANGOR DARUL EHSAN.

NUMBER OF WORDS : 3994 words

NUMBER OF PAGES : 74 pages

United Nation Environment Programme’s Executive Director Klaus Toepfer:

‘Industry is a key partner for sustainable development. We rely on industry, not

only for reducing the environmental impacts of the products and services it

provides us with, we also increasingly depend upon industry for the innovative

and entrepreneurial skills that are needed to help meet sustainability

challenges.’1

1 Taken from “Class of 2006: Industry Report Cards on environment and social responsibility” (UNEP, 2006)

Triple Bottom Line highlighted in Royal Dutch Shell 2000 CSR Obligations Reports :

“Excellent environmental performance is meaningless if no wealth is created.

Wealth in a destroyed environment is equally senseless.

No matter how wealthy, a society fundamentally lacking in social equity cannot

be sustained”.2

2 Taken from Royal Dutch Shell 2000 Community Service Responsibility Obligations Reports

Abstract

Kerteh – once a sleepy fishing village – has transformed economically into a city of

oil after the discovery of petroleum and natural gas. In 2002, PETRONAS Petroleum

Integrated Complex (PPIC) was commissioned, housing for world-scale petroleum-based

manufacturing facilities. The aim of this research was to investigate the integrated world-

class complex as key partner in sustainable development. Hence, the research question is ‘To

what extent has PETRONAS Petroleum Integrated Complex (PPIC) ensured sustainable

development of Kerteh, Terengganu?’

The areas of investigation were branched into three main components namely

economically viable, socially responsible and environmentally compatible to ensure

sustainable development. The theoretical framework proposed was derived from various

sustainable indicators and sustainability framework practised by oil and gas companies

globally. Certain modifications were made relevant to scope research. However, due to

limitation of data and word limits, not all economic criteria were presented.

The sustainability practises implemented by PPIC in balancing commercial,

environment and social objectives were analyzed to determine the impact on sustainable

development of Kerteh. Various sources were used to obtain data and statistics. Primary data

were obtained from interviews with six relevant authorities, surveys distributed to 150

respondents in Kerteh and based on own observation through visits. Secondary data were

collected from government agency and department websites, annual reports and published

materials.

Through critical analysis, it is discovered that PETRONAS Petroleum Integrated

Complex has ensured sustainable development of Kerteh to be economically viable, socially

responsible and environmentally compatible. However, the net welfare gain by stakeholders

in Kerteh might not be as high as expected due to welfare loss in environmental degradation

especially deterioration of mangrove ecosystem and greenhouse gases emission. Hence, more

initiatives should be taken in balancing all three components of sustainable development in

Kerteh without focusing only on maximizing profits in short term.

(295 words)

Table of Contents

1. Introduction..................................................................................................................11.1 Topic justification..............................................................................................11.2 Scope of research justification...........................................................................2

2. Objectives......................................................................................................................3

3. Hypothesis.....................................................................................................................3

4. Theoretical Framework...............................................................................................4

5. Methodology.................................................................................................................6

6. Results and Evaluations...............................................................................................7

6.1 Economically viable..........................................................................................76.1.1 Gross Domestic Output..........................................................................76.1.2 Infrastructure and utilities....................................................................12 6.1.3 Preparation for the future.....................................................................14

6.2 Socially Responsible.......................................................................................176.2.1 Societal Needs......................................................................................176.2.2 Education and Training........................................................................186.2.3 Employment and Income Distribution.................................................21

6.3 Environmentally Compatible........................................................................256.3.1 Air Quality............................................................................................256.3.2 Water Quality.......................................................................................286.3.3 Odour Concerns....................................................................................306.3.4 Greenhouse Gases Emissions...............................................................306.3.5 Biodiversity..........................................................................................31

6.4 Balancing Economic, Social and Environment Dimensions.......................34

7.0 Limitations..................................................................................................................35

8.0 Conclusion...................................................................................................................36

9.0 Bibliography...............................................................................................................38

10.0 Table of Figures..........................................................................................................42

11.0 Appendixes..................................................................................................................43