MALAYSIA: Petronas Chemicals scraps USD 1.3 billion elastomers project in Rapid

Petronas Chemicals Group Bhd (PetChem) has slashed its investment in the Refinery and Petrochemicals Integrated Development (Rapid) project by one-third over concerns on the future prospects of the synthetic rubber segment.

It is cancelling its elastomers plant, which is one of the three components of its petrochemical venture into Rapid that was originally tagged at USD 3.9 billion. The investment has been cut down by USD 1.3 billion to USD 2.6 billion.

In an announcement to Bursa Malaysia on 14 Apr 2016, PetChem said it had decided not to proceed with the elastomers project over concerns on the market outlook and return on investment (ROI) for the product.

“The decision was based on a review which was conducted on various key aspects of the elastomers project, including the product’s market outlook and project ROI."

“The project cancellation is expected to improve the overall returns of PetChem’s investments,” the group said.

In November last year, the group announced its entry into Rapid with the acquisition of three companies - PRPC Glycols Sdn Bhd, PRPC Polymers Sdn Bhd and PRPC Elastomers Sdn Bhd - from a unit under its ultimate shareholder, Petroliam Nasional Bhd.

It had then estimated that the total investment cost to undertake the polymers, glycols and elastomers projects to be USD 3.9 billion. It would have a combined capacity of 3.5 million t/y. The cancellation of the elastomers project will result in the capacity being reduced by 0.35 million t/y.

PetChem, however, said that it was committed to carrying out the two other projects, namely, the polymers and glycols projects.

“The cancellation of the elastomers project is not expected to have any impact on the commencement date for PRPC Polymers and PRPC Glycols, which is scheduled to start in 2019,” it said.

The Rapid project is one of the two catalytic projects under the larger Pengerang Integrated Petroleum Complex, which covers an area of 20,000 acres at the south-east tip of Johor.

Source: Daily “The Star”, Kuala Lumpur; 15 Apr 2016

(Syed Rashid Ali, Karachi, Pakistan)