PetChem makes offer to Sabah amid land problems


  • Business
  • Wednesday, 27 Jul 2011

KUALA LUMPUR: Petronas Chemicals Group Bhd (PetChem), which is currently trying to resolve land related matters for its proposed Sabah Ammonia-Urea plant project (Samur), has offered a 25% equity partnership to the state government.

Petronas Chemicals chairman Datuk Wan Zulkiflee Wan Ariffin said the project had not been fully sanctioned yet as the company was currently trying to reach an agreement with the Sabah government on land related matters. He added that Petronas Chemicals was open to having partners with a 20% to 30% stake to undertake the project.

“We have made an offer to the Sabah state a few months ago for a 25% stake and are waiting for the response,” Wan Zulkiflee told reporters after the company's shareholders meeting yesterday.

The stake offer serves as an incentive for both parties to reach an agreement over “land related matters” as it was the only condition that Petronas Chemicals had yet to satisfy for the project to start in the second quarter of next year.

Early this month, Petronas Chemicals said it would build a RM4.53bil urea fertiliser complex in Sipitang, Sabah, also known as Samur, with a production capacity of 1.2 million tonnes per annum. The project will be undertaken by a special purpose vehicle, the newly acquired Styrene Monomer (M) Sdn Bhd, which will be renamed Petronas Chemicals Fertiliser Sabah Sdn Bhd.

The company currently operates two urea plants, one with a 750,000-tonne capacity in Bintulu, Sarawak and another in Gurun, Kedah with a capacity of 683,000 tonnes, and would have a total capacity of 2.6 million tonnes with the completion of the Sipitang plant, which is to be commissioned by 2015.

The Samur project is part of the company's strategy to grow its fertiliser business as Asia Pacific remained a key market.

Asked on the funding of this plant, Wan Zulkiflee said the company practiced active capital management and its intention was to seek external funding for the project. However, funding needs will also be addressed once the land related matters are resolved.

Meanwhile, Wan Zulkiflee said potential acquisitions made by Petronas Chemicals would have to fit into the company's strategy and that it would only eye companies in the Far East and Asia Pacific.

“We are open to acquisition opportunities but we won't look at (continents) such as Europe,” he added.

President and chief executive officer Dr Abd Hapiz Abdullah said the company was not in serious talks with any parties and if the opportunities arose, acquisitions will only be made in either its olefins and derivatives business or its fertilisers and methanol business.

On capital expenditure, PetChem chief financial officer Wan Shamilah Saidi said the company would fund new projects utilising internal and external funds. She was referring to potential projects coming onstream, which included a specialty chemicals plant in Gebeng as well as a petrochemical complex under parent company Petroliam Nasional Bhd (Petronas)'s RM60bil refinery and petrochemical integrated development in Pengerang, Johor.

Last December, the company and BASF SE agreed to a joint feasibility study, which will end this year, to produce specialty chemicals in the country and the plant could cost some RM4bil.

“The company usually spends some RM700mil a year in expenditure for maintenance,” Wan Shamilah said.

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