Gov’t defers plan on naphtha plant

The government is likely to set aside plans to put up the pioneering $1.2-billion naphtha cracker plant in the country this year, Philippine National Oil Co. (PNOC) president Thelmo Y. Cunanan said.

"It will be some sort of "reprioritizing". We decided to first look at ways to help the mid-stream players in the petrochemical industry before putting up the naphtha cracker plant which is in the upstream," Cunanan said. "If we will have a healthy mid-stream petrochemical industry, the naphtha cracker project will also be successful."

Cunanan said one of the important developments in the mid-stream petrochem industry is the prospect of reviving the operations of the Bataan Polyethylene Corp. "There are ongoing talks among BPC’s equity holders and possible partners. It’s a good thing that they will revive BPC because it will just be considered as a white elephant," he said.

The PNOC chief said the petrochem industry can still survive without the naphtha cracker plant. "We can source the feedstock from Korea, Middle East and Taiwan."

But Cunanan pointed out that PNOC will not abandon the naphtha cracker project since they have already invested about $1 billion in developing a petrochem park.

PNOC and its subsidiary PNOC-Petrochemical Development Corp. (PPDC) have been scouting for potential joint venture partners for its two-phase naphtha cracker project which will be located in PPDC’s 530-hectare petrochemical park in Bataan.

In December 2002, PNOC completed the detailed feasibility study for the naphtha cracker plant.

There had been concerns that PNOC might shelve its naphtha cracker plant project as prospective investors had already withdrawn their petrochemical investments in the Philippines.

It was reported late last year that British Petroleum Plc. and Petronas pulled out of the BPC consortium. BP and Petronas each has a 38.5-percent interest in BPC consortium. The BPC plant has been completed as early as February 2000 but has been inoperational since August last year.

Cunanan said if they decide to push through with the naphtha cracker plant this year, they would still need six months to a year to firm up everything before the actual construction begins.

The naphtha cracker plant, which is expected to have a capacity of between 450,000 and 600,000 metric tons a year, will manufacture raw materials needed to make plastic products. Without the cracker facility, the country remains dependent on imported raw materials for the petrochemical industry.

The recommended plant capacity for the first phase is 450,000 tons of ethylene per year with provisions for debottlenecking to 600,000 tons per year after three years from commercial operation.

The cracker plant project, being the first of its kind in the Philippines, is expected to spur growth in the petrochemical sector. With the huge potential for growth in the consumption of plastic resins, the Philippines, at 5.2 kilogram per capita, is seen to be a good place to invest in petrochemicals. The average ASEAN per capita consumption is at 10.2 kg.

Meanwhile, the PNOC is preparing a possible joint venture partnership with Iranian Petrochemical Commercial Co. (IPPC), Cunanan said.

"We are conducting our due diligence and IPPC is also conducting its own due diligence. We are studying how to bring Iran in joint venture with PNOC in the integrated petrochemical industry," he added.

Cunanan said since PNOC signed a memorandum of understanding (MOU) with IPPC last January, they expect to come up with a concrete partnership with the Iranian firm anytime soon.

Based on the MOU, the two groups should be able to firm up a decision whether to push through with the partnership or not within six months of conducting feasibility studies.

"When we say integrated, we hope they could participate in the naphtha cracker plant, mid-stream and downstream petrochem industry," he said.

For the part of PNOC, he said they are willing to enter into joint venture with IPPC in the marketing side. "We are looking at product lines which are not manufactured in the Philippines so as not to compete with the existing petrochem companies’ products," he said.

Recently, he said IPPC has invited the PNOC to send a technical working group to Iran to take a look at possible products that it can offer. "Because of budget constraints, we told them to instead go here in the Philippines. At this time, we decided to just exchange information," he added.