PetChem plans RM4bil capex

High potential: Sazali (left) and chairman Md Arif at the press conference. Sazali also says the group’s INA plant is expected to come onstream in the second half of 2019.

KUALA LUMPUR: Petronas Chemicals Group Bhd (PetChem) expects to spend RM4bil in capital expenditure (capex) for the year, with the bulk of the funds to be channelled to its investments in the Pengerang Integrated Complex.

The group, which had RM7.4bil in cash and cash equivalents as at Dec 31, 2016, expected to use its internal funds for this.

As for the group’s Isononanol (INA) plant, which saw the final investment decision approved on April 18, 2017, the group said it would spend US$442mil (RM1.95bil) on the project over the next three years.

PetChem chief executive officer and managing director Datuk Sazali Hamzah said about 10% of this amount would be spent during this financial year.

He said PetChem saw high potential for the INA project in South-East Asia as well as the Asia-Pacific region in line with population growth.

The plant, which is expected to come onstream by the second half of 2019, will have a production capacity of 250,000 tonnes per year.

INA is an oxo-alcohol mainly used for the production of plasticisers (used to increase plasticity and flexibility) which is widely used in industrial applications such as automotive, wires and cables, floorings, buildings and construction.

“Another advantage of INA is that it is also low in toxicity, whereas other existing technology is a bit higher in toxicity, and some markets have banned those products by some of our competitors.

“So we expect that the demand for this will continue to grow,” he told a press conference here.

The group currently has five key ongoing projects, in which it has invested a total capex of RM10.1bil including the Sabah Ammonia Urea project and the Pengerang Integrated Complex project.

On the outlook for petrochemical prices, PetChem chairman Md Arif Mahmood said historically, petrochemical prices trended very closely to crude oil prices.

“We are hopeful oil prices will improve, but the consensus is that we will see prices at this level for a long time,” he said.

Although the group is moving to diversify into derivatives and specialty chemicals and solutions, Md Arif said its major revenue contributor would continue to be the basic chemicals.

“The production size of specialty products will not be as large as our basic chemical products.”

He added that the group’s total capacity was set to jump by an additional 20% once its ongoing projects are completed.

“Today our capacity is 10.8 million tonnes per year, and upon completion of all projects, we are expecting capacity to increase by 5.35 million tonnes,” he said.

On the Lotte group, which would be listing its Malaysian petrochemical unit Lotte Chemical Titan Holding Sdn Bhd on Bursa Malaysia in the third quarter of this year, Sazali said they did not see the group as a threat to their business in the region.

“Lotte has been in Malaysia for some time and its market is quite focused in South Korea.

“We are directly in competition with them in South Korea, but not in this region because we have a very strong position in South-East Asia and our commercial network here is huge,” he said.