JG Summit assures naphtha project on track

JG Summit Petrochemical Corp. (JGSPC) has assured the Board of Investments (BOI) that it is on schedule for its naphtha cracker project in spite of the resurrected complaint of former congressman and now governor of Bataan Enrique Garcia regarding the planned location of the plant in Batangas.

According to Trade and Industry Secretary Juan B. Santos, JGSPC is set to present this week to the Tariff and Related Matters (TRM) Committee its compliance to the timetable it had earlier submitted to the body.

JGSPC, likewise, Santos said, is talking to Garcia regarding the Bataan governor’s insistence that the project be located in Bataan.

However, on the part of the BOI, Santos explained that the BOI "does not dictate where the project should be located."

The BOI, Santos clarified, "reviews the merits of the projects and if they apply for incentives then we direct them to the special economic zones."

However, Santos said, "if they choose to locate elsewhere, they do not enjoy the incentives."

In insisting that the JGSPC naphtha cracker project be located in Bataan, Garcia had related that the first proposed naphtha cracker project, by then proponent Luzon Petrochemical Corp., was supposed to be built in Bataan.

The BOI had approved the project and gave the necessary incentives way back in 1988.

However, LPC took on Shell as a partner and it was decided to relocate the project to Batangas to combine the facility with Shell’s liquefied petroleum gas facility.

Garcia, through a series of lawsuits, was able to get a ruling from the Supreme Court in 1990 that an investor does not have the final say on where he wants to locate his investment.

However, the planned LPC/Shell naphtha cracker project was eventually shelved.

But based on that SC ruling, Garcia wants the BOI to force JGSPC to locate its project in Bataan.

Initially, Garcia plans to use non-legal means to convince the BOI and JGSPC to locate the planned naphtha cracker project to Bataan.

However, if the BOI and JGSPC ignore his argument, Garcia is ready to take legal action to force the BOI and JGSPC to adhere to the SC ruling covering the then LPC/Shell naphtha cracker project.

The BOI had recently approved JGSPC’s application for registration on a pioneer basis as a new domestic producer of ethylene, propylene, pyrolysis gas and other by-products.

Based on its application documents with the BOI, the JGSPC naphtha cracker project would have a cost of P26.247 billion to be financed primarily from loans amounting to P18.373 billion and equity contribution of P7.874 billion.

The JGSPC naphtha cracker project, however, is scheduled to start commercial operation by December 2008.

The projected output of JGSPC is 318 metric tons of ethylene, 189 MT of propylene, 218 MT of py gas, 150 MT of fuel gas (for JGSPC’s own use) and 28 MT of fuel oil (of which 16 MT or 58 percent would be for JGSPC’s own use and 12 MT or 42 percent for sale).

JGSPC’s major stockholder is JG Summit Holdings, Inc. with 82.28 percent, followed by Marubeni Corp. with 17.71 percent.

The JGSPC naphtha cracker project to be located in Batangas would be the first in the country and would complete the full integration of the petrochemical industry, cutting down dependence on imported ethylene and propylene feedstock.

However, the JGSPC naphtha cracker project is a backward integration of JGSPC’s existing polyethylene (PE) and polypropylene (PP) plants.

The naphtha cracker project was previously registered in May 2004 with the BOI as a new domestic producer of ethylene and propylene with a projected cost of P14.406 billion (at the then exchange rate of P28 to $1) and was supposed to start commercial operation last October 2004.