Saudi Arabia's state oil company Saudi Aramco will invest $7 billion in an oil refinery to be set up by Malaysian oil company Petroliam Nasional (Petronas), Malaysia's Prime Minister Najib Razak has announced.

The announcement was made on the second day of a four-day state visit to Malaysia by Saudi Arabia's King Salman.

The decision follows discussions between top executives from Petronas and Aramco and the plant, Razak was quoted as saying by a Channel News Asia report.

The refinery is part of Malaysia's $27 billion Refinery and Petrochemical Integrated Development (Rapid) project in Pengerang in the southern state of Johor.

The agreement is scheduled to be signed tomorrow (Feb 28) and will make Aramco the single largest investor in Rapid, said the report.

The Rapid  project, which is expected to begin operations in the first quarter of 2019, will contain a 300,000-barrel-per-day oil refinery and a petrochemical complex with a production capacity of 7.7 million metric tonnes.