Petronas turns back to Exxon for cracker talks

05 February 1994 00:00  [Source: ICB]

MALAYSIAN STATE-OWNED oil and gas major Petronas is believed to be interested in restarting talks with Exxon concerning an equity collaboration for a new grassroots cracker in the country. The two companies previously held talks for the 320 000 tonne/year cracker now being built at Kerteh, Terengganu (ECN 29 March 1993). 'Esso has always been interested in doing a cracker with us,' said a Petronas spokeswoman. 'The company was a candidate for the first cracker.'

However, Jon Caldwell, ventures director at the Singapore-based Exxon Chemical Asia's basic chemicals group, said it was premature to comment on future projects. 'It is far too early even to speculate,' he said. 'We always continue to talk to Petronas. We're good friends.'

Exxon lost out to BP and Idemitsu for the Kerteh ethylene/PE project, construction of which is proceeding on schedule with startup due in mid-to-late 1995. Neste and Mitsui & Co were also named as previous multinationals vying for the project, and Conoco was also believed to show an interest (ECN 20 November 1989).

A new cracker could eventually tie-in to Petronas' current plans to expand gas processing activity. 'There are plot allocations for another cracker in the gas processing plan, and space available for a downstream complex near the current MTBE unit at Kuantan,' one onlooker said.

Bids have recently been requested for Petronas' planned 1bn ft³ fifth and sixth gas processing plants at an adjacent site north of Kuantan on the east coast, due onstream during 1997-98, which will offer a high ethane yield. Petronas' ambitions are to go to eight gas plants eventually, sources say.

Where ethylene is concerned, expansion of the Kerteh plant is also an option, although it is unclear if this is viewed as either-or. According to a spokesman for BP, the intention is to expand the cracker eventually to 500 000 tonne/year by adding new furnaces, and expand the PE plant from 200 000 tonne/year to 300 000 tonne/year.

What makes plans for a further cracker uncertain right now is the view taken by the government. The ministry for international trade has publicly said it will not grant any further ethylene and PE licences for the foreseeable future, although sources believe this policy may change after current projects are fully onstream. 'The government is pragmatic and wishes to protect new industry for the first few years,' said one. For example, Titan Petrochemicals officially opened its 230 000 tonne/year cracker and PE plant at Pasir Gudang on 24 March, and the government has recently put in place a 30% import tariff for PE.

Competition between Petronas and Titan is believed to be strong. 'The government is keen to see both competing as Petronas has been slow off the mark in petrochemicals,' said one source. 'In fact, Titan's project was the spur to Petronas.'

Onlookers speculate that Titan may have plans of its own to expand its cracker in the next few years, in which case the two companies will 'need to work out market share between themselves'.

The potential of a further cracker for Petronas forms part of the company's broad-based long-term plan to increase its petrochemicals activity both at home and abroad. Last year the company reportedly spent a fortune commissioning a US consultant to produce a petrochemical masterplan strategy report, the details of which are now being studied.

Where derivatives are concerned, sources say the masterplan basically contains 'one of everything'. Petronas is said to be holding initial discussions with potential foreign partners, although details are scarce at this stage.

Hoechst Celanese' VAM plans for Southeast Asia may end up in Malaysia, sources speculate. VCM is being talked, and methanol continues to be studied (ECN 4 June 1990). BP may look at an acetic acid plant in the country.

Malaysia has 'grandiose ideas about itself', onlookers say. The country is positioning itself as the second fastest growing economy next to China - a claim some question - with a forecast annual growth of over 8%.

At least to succeed in implementing the government's development plan - designated 'Vision 2020' - it will need to sustain growth at this rate, sources comment. Vision 2020 seeks to make the country fully developed in terms of GDP by this date.

The country's industrial development environment is positive, says Chem Systems' Steve Rothman. The country is energy-rich, has a stable government, a modest but prosperous population base, available infrastructure, a capable and cost-effective labour force, and access to regional markets.

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