Air Products signs agreement to build Malaysia’s first LNG-based Air Separation Unit at Pengerang terminal in Johor

Written by Kelly Lippke Air Products has signed a definitive agreement with PG Cold Energy 1 Sdn. Bhd. — a joint venture led by PETRONAS Gas Berhad and DIALOG Group Berhad — to design, build, and operate Malaysia’s first LNG-based Air Separation Unit at the Pengerang LNG regasification terminal in Johor. The deal was formalized at a signing ceremony held at the PETRONAS Twin Towers. It marks Air Products’ fifth such facility in Asia.

The joint venture at the center of this deal — PG Cold Energy 1 Sdn. Bhd. (PGCE1) — brings together two major players. PETRONAS Gas Berhad participates through PG Energia Sdn. Bhd., while DIALOG Group Berhad joins via DIALOG Equity (Three) Sdn. Bhd. Together, they form the partnership that’ll host the new facility at the Pengerang LNG regasification terminal in Johor.

The signing ceremony carried real symbolic weight. Senior executives from all three organizations attended at the PETRONAS Twin Towers: PETRONAS Gas Berhad’s Managing Director and CEO Abdul Aziz Othman, DIALOG Executive Deputy Chairman Chan Yew Kai, and Air Products’ Asia President Kurt Lefevere. That venue, combined with that roster, signals just how strategically significant all parties consider this project.

For Air Products, this is more than a new contract. It’s their fifth LNG-based ASU in Asia — and the first of its kind anywhere in Malaysia.

Air separation is an energy-intensive process. Conventional units must generate enormous amounts of cooling power to liquefy air before separating it into components — a demand that carries both cost and emissions.

The Pengerang facility takes a different approach. It taps into the cold energy naturally released when LNG — stored at extremely low temperatures — gets regasified for use. That cold energy, which would otherwise go to waste, gets redirected to chill and liquefy incoming air, so the separation process needs significantly less external energy input.

This integration makes practical sense. The ASU sits directly at the regasification terminal, meaning the cold energy doesn’t have to travel far. Capturing it on-site is efficient by design, and the environmental upside is real: cutting the energy needed for production reduces the emissions tied to making industrial gases. For customers in sectors where carbon footprint increasingly matters, that’s a tangible benefit — not just a marketing point.

Scale is one of this project’s defining features. The facility will produce more than 600 metric tons of liquid oxygen, nitrogen, and argon every day — substantial output aimed at a broad swath of industrial customers across Southern and Central Malaysia.

Air Products expects the plant to come online by early 2027. Once operational, it’ll supply the merchant market in that region, giving industrial buyers access to a locally produced, lower-emission source of industrial gases. Electrical and electronics manufacturers, petrochemical operations, aerospace companies, and general manufacturing businesses all rely heavily on these products, and demand from these industries has been growing steadily.

Southern and Central Malaysia have been developing as industrial hubs. A reliable, large-scale local supply of oxygen, nitrogen, and argon supports that growth directly.

Air Products isn’t new to Malaysia. The company has operated here since 1974 — more than 50 years of continuous presence — and has built out a network of production facilities and depots positioned across the country to serve different regional markets.

In the north, Air Products already runs advanced ASUs in the Prai Industrial Area and operates a pipeline network serving the Batu Kawan and Bayan Lepas Industrial Park in Penang, both key zones for the electrical and electronics sector. That northern infrastructure is well-established.

The Pengerang project extends that footprint south, strengthening the company’s ability to serve customers in Johor and the broader Southern and Central Malaysia corridor. The relationship with PETRONAS Gas Berhad runs deep. Air Products’ Southeast Asia President Ramani Velu noted that the partnership spans more than four decades. “We are honored by their continued trust in Air Products to support their and Malaysia’s effort to advance lower-emission industrial development,” he said.

This agreement does several things at once. It introduces LNG cold energy recovery to Malaysia’s industrial gas market — a technology approach not previously used here. It also adds more than 600 metric tons of daily production capacity to serve growing demand across the south and center of the country.

The Pengerang terminal provides the infrastructure backbone. The joint venture provides the commercial framework. Air Products brings the technical expertise, backed by four previous LNG-based ASUs already operating elsewhere in Asia, and the plant’s expected 2027 startup gives all parties a concrete near-term milestone to work toward. Woven through all of it is a long-running partnership between Air Products and PETRONAS Gas Berhad, now with a sustainability dimension built into the design from the start.

Kelly is an experienced writer with 15 years of experience exploring the big stories that shape our world, from tech breakthroughs and space exploration to climate, energy, and the fascinating quirks of science. She has a talent for turning complex ideas into sharp, memorable insights that stay with readers long after they’ve finished reading.

Kelly is an experienced writer with 15 years of experience exploring the big stories that shape our world, from tech breakthroughs and space exploration to climate, energy, and the fascinating quirks of science. She has a talent for turning complex ideas into sharp, memorable insights that stay with readers long after they’ve finished reading.

Kelly is an experienced writer with 15 years of experience exploring the big stories that shape our world, from tech breakthroughs and space exploration to climate, energy, and the fascinating quirks of science. She has a talent for turning complex ideas into sharp, memorable insights that stay with readers long after they’ve finished reading.