Corrected: Malaysia’s PCG on track to complete PIC projects in 2019

Nurluqman Suratman

09-May-2017

Correction: In the ICIS story headlined “Malaysia’s PCG on track to complete PIC projects in 2019” dated 9 May 2017, please read in the third paragraph …the polymer and glycol project is about 30% complete… instead of …the polymer and glycol project is about 62% complete… Company names have also been clarified in paragraphs 18-19. A corrected story follows.

PCG CEO Sazali Hamzah 9 MayKUALA LUMPUR (ICIS)–PETRONAS Chemicals Group (PCG) is on track to complete in second-half 2019 its current projects at the Pengerang Integrated Complex (PIC) in the southern Malaysian state of Johor, the company’s CEO Sazali Hamzah said.

These include the $2.6bn polymers and glycol projects, as well as the proposed isononanol (INA) production facility at the site.

“At end-March the polymer and glycol project is about 30% complete and we are slightly ahead of schedule,” Sazali told ICIS late on Monday, on the sidelines of the 19th Asia Oil & Gas Conference in Kuala Lumpur.

The polymers project consists of a polypropylene (PP) plant with a 900,000 tonne/year capacity; a 350,000 tonne/year metallocene linear low density polyethylene (mLLDPE) unit; and a high density polyethylene (PE) facility with a 420,000 tonnes/year capacity, he said.

The glycol plant will be able to produce 800,000 tonnes/year of monoethylene glycol (MEG), according to Sazali.

On 18 April this year, PCG approved the final investment decision to build an INA plant at the site.

The Malaysian ringgit (M$) 1.95bn ($449m) INA facility with 250,000 tonnes/year of capacity is aimed at the downstream automotive and toy markets, which require softer, environmentally-friendly plastics, he said.

The INA project, which is on track to start up in 2019, should address the expected rapid growth in demand from these downstream markets, particularly in southeast Asia and China. The bulk of the plant’s output will be exported, Sazali said.

The plant will source its major feedstock from PETRONAS Refinery and Petrochemical Corp’s (PRPC) cracker complex.

PRPC is a wholly owned subsidiary of Malaysia’s state-owned oil and gas firm PETRONAS, which is also the parent firm of PCG.

The INA project is currently in the detailed engineering design stage and construction has yet to begin. Installation contractors will be appointed once the detail design packages are completed, a company spokesperson said.

PETRONAS’ PIC houses a 300,000 bbl/day refinery as well, as a steam cracker complex, which is expected to have 1.2m tonnes/year of ethylene capacity.

As of the end of March, the refinery is 72% mechanically complete while the steam cracker complex is 73% complete, PETRONAS said in a video presentation at the AOGC.

PCG plant 9 May

Elsewhere in Malaysia, the company’s new aroma ingredients complex in Gebeng, Pahang, is in commissioning phase, with full start-up expected within this year, Sazali said.

This project is an undertaking with German chemicals major BASF through associate company BASF PETRONAS Chemicals.

The citral, citronellol and L-menthol units at the complex were built to meet high demand growth from the fragrance and flavour industries. The plants produce aroma ingredients used in home and personal care products, and have applications in the food and pharmaceutical industries. Meanwhile, the company’s new Sabah Ammonia Urea (SAMUR) project is currently running at 102% of capacity, according to Sazali.

As of April this year, some 148,813 tonnes of ammonia and 187,300 tonnes of urea have been produced at the project, with majority of the output exported to Thailand and other ASEAN countries, as well as Australia, he said.

Sazali said that the company’s overall plant utilisation rate will be at the “high 80s” this year, down from 96% in 2016 due to heavy turnaround schedules at associate firm PETRONAS Chemicals Olefins plants in Kerteh.

PETRONAS Chemicals Olefins is a joint venture between Malaysia’s state-owned oil and gas firm PETRONAS and US petrochemicals major Dow Chemical. Its cracker with a 600,000 tonne/year ethylene capacity is due for maintenance later this year.

For the whole of 2017, PCG’s overall earnings will be largely determined by crude oil prices and the overall health of the regional and global economy, Sazali said.

“Our business is tightly related to GDP growth… if that falls there will be less demand and prices will fall,” he said.

“It used to be that ammonia and urea [were] not linked to crude oil prices but after the crisis [slump in crude oil prices] we see that their prices follow the movement,” Sazali said.

“If crude prices are higher than last year and we achieve the high 80s plant utilisation rate as what we target, then it [earnings] will be slightly better,” he added.

On the recent $7bn investment by Saudi Aramco to buy an equity stake in the PIC, Hamzah said that the move by the oil giant is expected to help PCG “free up capital” on new downstream derivative and specialty projects in the future but nothing has been finalised yet on that front.

“It ranges from engineering plastics, specialty chemicals, plasticizers… and also ammonia and urea derivatives. This is a play that we have not touched before as we have focused on strengthening our basic chemicals portfolio,” he said.

The new projects will not just involve the PIC but also the company’s production sites in Gebeng, Kerteh as well as in east Malaysia, Sazali said.

Some of these new projects could involve Saudi Aramco but there are several that PCG will execute by itself, he said.

Interview article by Nurluqman Suratman

($1 = M$4.34)

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