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UPDATE 2-Petronas-Saudi JV to restart crude unit at Malaysia refinery in July -sources

-sources@

* Still assessing damage at desulphuriser

Repairs could take months (Adds details)

By Florence Tan and A. Ananthalakshmi

SINGAPORE/KUALA LUMPUR, June 27 (Reuters) - Pengerang Refining and Petrochemical (PrefChem), a joint venture between Petronas and Saudi Aramco, is expected to restart a crude distillation unit at its oil refinery in Malaysia in July, three sources familiar with the matter said.

The Pengerang Refining development, part of Petronas' $27 billion Pengerang Integrated Complex, consists of a 300,000 barrels-per-day (bpd) oil refinery and a petrochemical complex with a production capacity of 7.7 million tonnes per year in the southern Malaysian state of Johor.

The refinery stopped trial runs in April for safety checks after a fire occurred at the atmospheric residue desulphurisation (ARDS) unit.

Contractors are still assessing the extent of damage at the fire-hit ARDS unit and repairs could take between three months and two years, one of the sources said, citing initial estimates.

The CDU will be processing low-sulfur crude in the absence of the desulphurisation unit, the sources said.

The ARDS unit was set up to remove sulfur from fuel oil which is then passed through a residue fluid catalytic cracker (RFCC) - a secondary refining unit that upgrades residual fuels into higher quality products such as gasoline. The ARDS unit is located close to the refinery's CDUs.

The refinery is expected to produce fuel in August-September although output may not meet commercial specifications yet. A 1.2-million-tonnes-per-year naphtha cracker at the site started trial runs this month.

By restarting the CDU in July, the refinery is working towards producing fuel that meets commercial specification by the end of the year, the sources said.

The project, originally known as RAPID, or Refinery and Petrochemical Integrated Development, was to resume operations by the end of this year, Petronas said in a statement last month.

Petronas and PrefChem have not responded to emailed requests for comment. (Editing by Christian Schmollinger/ Tom Hogue/Susan Fenton)