Market intelligence: PTT plans $4bn spend

PTT Global Chemical (PTTGC) is prepared to invest around $4bn in industries that support the Thailand government’s Eastern Economic Corridor (EEC) project over the next five years.

The investments by the petrochemical flagship company of Thai oil and gas giant PTT should help spur private sector participation in the initiative. “Total investments in the EEC, to move towards the new … industries in line with the government’s Thailand 4.0 policy, are expected to be in the range of almost $4bn,” PTTGC president and CEO Supattanapong Punmeechaow told ICIS.

The $45bn EEC – which covers the provinces of Rayong, Chonburi and Chachoengsao, off the coast of the Gulf of Thailand, with a total area of 13,000 square kilometres – is expected to be “an important centre for trade, investment, regional transportation and a strategic gateway to Asia”, according to the country’s Bureau of Investments (BOI).

The EEC is envisioned as “a major industrial area, with a strong focus on industries where Thailand is a leading global player such as the petrochemicals industry (among the top five in Asia), and the automotive and electronics sectors”, it said. Its development is an essential component to the country’s embrace of an “innovation-driven” economic model dubbed Thailand 4.0.

Thailand, which is southeast Asia’s second-biggest economy, has gone through phases of development focus that started with agriculture, to utilisation of cheap labour and local natural resources, before moving on to more complex industries, according to the BOI. Petrochemicals, with production based in Map Ta Phut in Rayong province, is one of the existing five main engines of growth for the Thai economy.

New industries that will also be the focus of development in Thailand’s latest economic model consist of robotics, aviation/logistics, biofuels/biochemical, the digital economy and medical hubs. “We aim to intensively invest in a group of projects within the next one to two years to strengthen the competitive advantage of its [the company’s] existing businesses by attracting international partners who have advanced technology to co-invest in projects with us and [by] expanding downstream product portfolios,” Supattanapong said.

Included in PTTGC’s projects in the EEC is the “Map Ta Phut Retrofit Project”, which entails construction of a new naphtha cracker with an ethylene capacity of 500,000 tonnes/year and propylene capacity of 250,000 tonnes/year.

The new cracker slated for commercial production by 2020 will help PTTG diversify its feedstock mix, which is currently dominated by gas. PTTGC has three gas crackers with a combined ethylene capacity of 1.86m tonnes/year, and one naphtha cracker with a 515,000 tonne/year capacity. “This will provide value added for our naphtha to extend [the] value chain in olefins and derivative,” the PTTGC chief said.

A final investment decision on the cracker project will be made before the year ends. Within the EEC, PTTGC is also pursuing three other major projects, two of which are in partnership with Japanese companies. PTTGC has roped in Sanyo Chemical and Toyota Tsusho for its propylene oxide (PO) and polyurethane (PU) system project. A new plant will be built to produce 200,000 tonnes/year of PO and 130,000 tonnes/year of polyols. These product lines “directly follow our long-term business strategy in the key platforms of automotive, electronics & electrical and construction” industries, Supattanapong said.

HIGH-HEAT RESISTANT PA9T

Another project involving Japanese partners is the high-heat resistant polyamide-9T (PA9T) and hydrogenated styrenic copolymer (HSBC) project to be built at the Hemaraj Industrial Estate in Rayong province. PTTGC has entered into a joint venture agreement with Kuraray and Sumitomo to conduct a feasibility study and front-end engineering design (FEED) on the project, which will use feedstock butadiene (BD) to be provided by the company to produce 13,000 tonnes/year of PA9T and 16,000 tonnes/year of HSBC. “The agreement will lead to a new joint venture company that is expected to commence operation in late 2021,” Supattanapong said.

PTTGC is also working towards operating its petrochemical business “in an environmental friendly manner”, Supattanapong said.

It has a listed subsidiary called Global Green Chemicals Public Co (GGC), which is one of the largest producers of methyl esters and the only producer of fatty alcohols in Thailand. “We, hand in hand, with GGC take part in [the] Thai government’s bioeconomy initiative, as a sub-mechanism of EEC, aiming towards expanding product portfolio in green business and building fully integrated value chain with partners in feedstock, technology and market aspects,” the PTTGC chief said.

The investments on ECC should help boost growth in Thailand’s economy. In the second quarter, the economy posted a 3.7% year-on-year growth, driven by the acceleration of exports. For the whole 2017, it is expected to post an average growth of 3.5-4.0%, according to latest data from the country’s National Economic and Social Development Board (NESB).

Meanwhile, PTTGC is also continuing its push toward expanding its presence outside of Thailand and is upbeat on the plastics industry growth prospects of the Cambodia, Laos, Myanmar and Vietnam (CLMV) markets, from which PTTGC aims to generate sales of Thai baht (Bt) 2bn-3bn.

The four countries are the closest neighbours of Thailand in southeast Asia. “We set a firm target within five years to expand the CLMV plastics industry in southeast Asia and AEC [ASEAN Economic Community] to 100,000m Baht (Bt100bn),” Supattanapong said, adding that growth in the CLMV markets has been “very high and attractive when compared to other regions”.

In Indonesia, however, PTTGC’s refinery and petrochemical project has remained on hold. “The government of Indonesia has changed … direction in investment policies so we have decided to delay the investment; however, we will continue to sell polyolefins products into Indonesia to capture growing demand,” Supattanapong said.

In the US, PTTGC intends to tap shale opportunities by building an ethane cracker in the northeastern state of Ohio. The planned US cracker complex at Belmont County, Ohio, will have an ethylene capacity of 1m tonnes/year and will have two 350,000 tonne/year high density polyethylene (HDPE) units; will produce 500,000 tonnes/year of monoethylene glycol (MEG); and 100,000 tonnes/year of ethylene oxide (EO).

“We are considering economic viability, risk assessment, as well as other key elements on the project to ensure its readiness and compliance to our final investment decision criteria,” Supattanapong said.

PTTGC is expected to make a final decision on the US cracker investment before the end of the year. The PTTGC chief dispelled industry concerns over a possible global oversupply of ethylene amid heavy global investments in new crackers, citing delays in actual start-up of some projects and the three to six months’ period required for one to ramp up to full production.

“So the effective additional capacity will be less than plan and will be absorbed by grow[th] in demand [at] 4.0% year on year,” Supattanapong said.