Sunday 12 June 2011

Petronas Chemicals banks on three projects to strengthen its position

Petronas Chemicals Group Bhd is banking on three future projects to boost its capacity that is expected to strengthen its footing as a market leader in the petrochemicals industry in South-East Asia.

The three projects are the refinery and petrochemical integrated development (Rapid) in Pengerang, Johor, specialties chemicals project with BASF SE and a fertiliser plant in Sabah.

President and chief executive officer Dr Abd Hapiz Abdullah said its parent company Petroliam Nasional Bhd (Petronas) was now doing a feasibility study on the US$20bil Rapid project. The study is expected to be completed by the end of next year.

“Once we have that in place, we will then make a decision on whether we want to take on the petrochemical aspects of the project.

“Rapid's capacity is significant in size about three million tonnes annually,” he told a briefing during a media visit to Petronas Chemicals' plant in Kertih on Thursday.

Market leader: An aerial view of one of Petronas Chemicals’
plants in Kertih, Terengganu.

Currently, Petronas Chemicals' annual capacity stands at 11.5 million tonnes.

On the venture with BASF, Abd Hapiz said the project was also now undergoing a feasibility study, which should be completed within this year. “By then, we will know how to move forward with the project,” he said.

Last December, Petronas signed a memorandum of understanding with BASF to do a joint feasibility study to produce specialty chemicals in the country. The tie-up could cost up to RM4bil.

Additionally, Petronas Chemicals' RM1bil fertiliser plant in Sipitang, Sabah, is expected to be operational in the third quarter of 2014.

The Sabah ammonia-urea plant can produce 2,100 tonnes of ammonia and 3,500 tonnes of urea a day.

Abd Hapiz did not rule out the possibility of selective acquisitions, if any, as part of Petronas Chemicals' growth strategies.

“As of now, we do not have any concrete plan yet but our balance sheet is robust and that supports us to be selective in this area of growth,” he said, adding that as at the end of its financial year ended March 31, the company's cash stood at RM8bil.

On the industry outlook, Abd Hapiz said he was comfortable with the demand for certain products.

He said urea demand was quite strong although there were new capacities cropping up.

“Polymer demand, on the other hand, is forecast to be relatively flat in the next one to two years.

“The calamity in Japan has also created some upsurge in short-term demand, especially from the construction industry,” he said, adding that demand in North and Latin America was also quite strong.

Regionally, in addition to India and China, Abd Hapiz said the demand from Indonesia and Vietnam was on the rise.

Petronas Chemicals is one of the two listed units of Petronas. For the financial year ended March 31, Petronas Chemicals achieved a net profit of RM2.99bil and revenue of RM14.6bil.

The company contributed about 6% of Petronas' revenue.