PNOC seeks partners for $600-M naphtha project

State-owned Philippine National Oil Co. is still scouting for strategic and joint venture (JV) partners for the proposed $600-million naphtha cracker plant, PNOC president and chief executive officer Thelmo Cunanan said yesterday.

In an interview, Cunanan said they have opened the door to other investors after the groups which have indicated keen interest in investing in the project have decided to adopt a "wait-and-see attitude."

For instance, Cunanan said the deal with Chinese Petroleum Corp., one of the possible joint venture partners, is taking more time than expected.

He said they are working hard for JV agreements but there are factors that need to be considered assuming that the deal with Chinese Petroleum Corp. pushes through.

"It is difficult to achieve joint venture agreement with Chinese Petroleum since they still have to get the approval from their government. These are factors that are beyond our control," Cunanan explained, when asked why the signing of a memorandum of agreement (MOA) with investors is taking so long.

PNOC, through its subsidiary PNOC-Petrochemical Development Corp. (PNOC-PPC), is willing to take up 34-percent equity in the proposed naphtha cracker plant. The remaining shares will be auctioned off to possible JV and strategic partners.

"We (PNOC) have authorized PPDC to search and explore for possible underwriters for this project," he said.

According to Cunanan, they are having a hard time convincing the investors to push through with the project since "most of them are waiting for the implementing rules and regulations (IRRs) of the newly-enacted Electric Power Industry Reform Act or Republic Act No. 9136."

He said some prospective investors are raising concerns over the unresolved issue of the 10-percent tariff on imported raw materials for petrochemical products.

The PNOC president said some investors also want to be assured of sufficient power in the near future. The petrochem industry is dependent on power.

The previous PNOC administration had plans of floating some $300 million to finance their naphtha cracker project.

The PPDC, a wholly-owned subsidiary of PNOC, is exploring talks with at least 11 prospective foreign and local investors to take up the remaining 66-percent share in the naphtha cracker plant project.

Based on the plan, PPDC will take the lead in establishing a cracker plant with a capacity of 600,000 to 700,000 tons per year to be operational by 2004 or 2005.

Aside from Chinese Petroleum, JG Summit Holdings Corp., the investment arm of the Gokongwei family, is also planning to join the talks for this particular naphtha project. JG Summit earlier indicated its plan to put up its own naphtha plant since it runs a polypropylene plant in Bataan.