Thai PTTGC loss from gas separation unit outage minimal: Moody's

19 August 2013 11:40 Source:ICIS News

SINGAPORE (ICIS)--Thailand’s PTT Global Chemical (PTTTGC) is not expected to incur heavy losses from the shutdown of a gas separation unit that provides feedstock to some of its production plants in Map Ta Phut, Moody’s Investors Service said on Monday.

Gas separation unit No 5, which is operated by PTTGC’s parent firm PTT, was shut on 14 August and may stay down for up to five months.

“The company [PTTGC] has insurance coverage which should partially absorb the cost of repair, in addition to the cost of business interruption," said Simon Wong, vice president and senior credit officer at Moody’s.

The shut gas separation unit supplies feedstock to PTTGC’s I-4 No 2 cracker, which has an olefins production capacity of 450,000 tonnes/year.

The No 5 unit is one of PTT's six gas separation plants and accounts for a fifth of the company's combined processing capacity of around 2.74bn standard cubic feet per day, according to Moody’s.

PTTGC does not expect to face any negative financial repercussions from its end-users, such as penalties, due to the force majeure nature of the shutdown, the ratings firm said.

"In terms of the financial impact of the shutdown on PTTGC's net profit, the company estimates that it will lose no more than Bt400m ($13m) a month or Bt1.8bn in 2013, which will not have a material negative impact on its full year results," Wong said, citing that in 2012, PTTGC reported a full-year net profit of Bt34bn.

Any negative financial impact from the gas separation plant shutdown will be partly cushioned by higher refining margins reported so far in the third quarter, compared to the April-June period, Moody’s said.

"PTTGC also plans to divert LPG [liquefied petroleum gas] produced from its own refinery to its olefins plant to minimize the impact of the shutdown at PTT's factory. Moreover, PTTGC will re-allocate available gas feedstock to its olefin crackers," Wong said.

The company’s olefin crackers are expected to run at lower rates in the second half of this year, compared with the 95% utilisation recorded in the first six months of this year, according to Moody’s.

"In addition to seeking alternative sources of gas feedstock for its olefins plant, we expect PTTGC to re-optimize internal feedstock allocation at its olefins plant and increase the proportional use of naphtha in place of gas feedstock. However, this substitution will result in higher feedstock costs and reduce its profitability," Wong said.

In the second quarter of this year, 90% of PTTGC's olefins intake was gas feedstock, while the remaining 10% was naphtha, according to Moody’s.

($1 = Bt31.3)

By Nurluqman Suratman