The Petronas Decision And Singapore

UScrackers15April2014

By John Richardson

THE blog continues to ponder the significance of the Petronas announcement that it is to go ahead with its $27bn refinery-petrochemicals project – the Pengerang Integrated Complex (PIC) at Johor in Malaysia.

“It means that Singapore faces a competitor with deep pockets. Time to assess the winners and losers on Singapore’s Jurong Island,” an industry observer told the blog last week.

We have few details about exactly what Petronas will build at PIC other than this very sketchy announcement from the Malaysian state-owned oil, gas and petrochemicals giant: “[The complex] will consist of a 300,000 bbl/day refinery and a petrochemical complex, which is expected to produce 7.7m tonnes/year of various grades of products, including differentiated and speciality chemicals products, such as synthetic rubbers and high grade polymers.”

The phrase “differentiated and speciality chemicals” might be enough, though, to ring alarm bells in Singapore as this is also the direction in which Jurong Island is also heading.

And one would have thought that a complex of the scale being planned by Petronas  cannot entirely involve specialities, given that the specialities produced there would be at risk of becoming commodities as a result of oversupply.  Thus, Singapore and other Asian petrochemical producers might also face competition in the commodities space from PIC.

We also continue to worry that there will not be enough room for all the new petrochemicals projects being planned, both in Asia in general and in the US.  (see the above table for an updated list of some of the many new crackers due on-stream in the States).

The key assessment for us remains China’s ability and willingness to absorb surplus petrochemicals volumes over the next decade, given that it is by the far the biggest consumer in the region.

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