In a disclosure to the Philippine Stock Exchange (PSE) over the weekend, Petron said its board of directors has endorsed the company’s compliance with the terms and conditions of the Board of Investments (BOI) for the application of incentives for its BTX (benzene, toluene and xylene) and propylene recovery (PRU) projects.
"Our entry into petrochemicals supports our strategy of investing in higher margin businesses which will increase our presence in the regional market," Petron president and CEO Khalid D. Al-Faddagh said.
Al-Faddagh said this move is consistent with the company’s overall thrust of exploring other business opportunities related to oil refining.
"Our focus in the next five to 10 years is to develop our refinery assets to capture the unique opportunities presented by the developments in the petrochemical industry," he said.
Petron said the new PRU project will produce propylene, the feedstock used in the manufacture of plastic resins that is, in turn, used for making home appliances and automobile parts, among others.
The BTX project, on the other hand, will enable Petron to extract benzene and toluene as well as double its mixed xylene production capacity.
These three petrochemical products have various applications including the production of plastics, textiles, pharmaceuticals, solvents, adhesives and food packaging.
According to Al-Faddagh, the company’s new petrochemical facilities are expected to be onstream toward the end of 2007.
In undertaking these two new projects, Petron is banking on the opportunities brought about by the unprecedented growth in the global petrochemical market.
"Given the relatively mature fuels market, petrochemical feedstock production offers a good complementary avenue for ensuring Petron’s long-term growth and profitability," Al-Faddagh said.
Earlier, the BOI approved the applications for registration of the company as a new export producer of petrochemical products (benzene and toluene on a pioneer status and mixed xylene on a non-pioneer status) and as a new domestic producer of petrochemical products (propylene on a pioneer status).
Among the project incentives include income tax holidays and lower duties on the importation of capital equipment.
Unlike the petroleum industry where there is a noted slowdown in demand, the petrochemical demand is seen to grow at a pace of about five percent from 2005 to 2015.
Petrochemicals also command better regional and local prices than other petroleum products.
Aside from the production of petrochemicals, the two new units will improve cost-efficiencies at Petron’s 180,000 barrel-per-day Bataan refinery and provide more flexibility in the production of environment-friendly fuels.
These projects are part of Petron’s $250-million refinery master plan over the next five years.
The five-year refinery blueprint includes the upgrade of its present cracking unit to a petro fluidized catalytic cracker (FCC) that will increase the yield of higher value white products.
As of the first half of 2005, Petron’s export sales, especially in mixed xylene, contributed nearly a third of its net income of P2.31 billion as it continued to take advantage of favorable prices abroad.
In May this year, Petron commissioned its $100-million Clean Air Act compliant facilities which put it in a unique position of being the only oil company capable of locally producing fuels that meet the stringent qualities mandated by the law.