Taiwan’s Kuokuang opts out of Malaysia’s Pengerang project

Citing the more effective method of shale gas extraction as opposed to naptha cracking, Taiwan state-owned Kuokuang Petrochemical Technology Company (KPTC) has decided not to proceed with its RM35 billion investment in the Pengerang Integrated Petroleum Complex (PIPC) project in Johor. Chairman of CPC Corporation, which owns KPTC, Lin Sheng-Chung, has been quoted by Taiwan’s Commercial Times as having said that the global trend of shale gas extraction has had an impact on the performance of naphtha cracking. Using ethane in shale gas as the raw material for ethylene only costs half of the amount as compared to using traditional raw material of naphtha, Lin said, adding that since shale gas extraction is more cost-effective, the company needed to reconsider all its investment proposals abroad that were of naphtha cracking nature. He also said that KPTC was making a string of investments in China.

Kuokuang signed a letter of intent on land investment with the Johor government in July last year. The investment proposal passed a detailed environment impact assessment (DEIA) last month, and the report is now under the scrutiny of environment ministry.

The proposed KPTC plant makes up 10% of the entire PIPC. Spanning 22,500 acres, PIPC is the country’s largest ever infrastructure project and will house oil refineries, naphtha crackers, petrochemical plants as well as a liquefied natural gas (LNG) import terminal and a regasification plant.

This is not the first obstacle PIPC has faced. Malaysia’s petroleum firm Petronas, which will also site its petrochemicals complex in PIPC, is now starting up its RM$60 billion Refinery and Petrochemicals Integrated Development (RAPID) in 2018, six months later than expected, the company told Reuters last month. Sources say the project has been complicated by a need to secure water supplies as well as cater for proposed international partners.

Petronas had delayed its project from late 2016 to early 2017 and revised the final investment decision (FID) to the first quarter next year, citing state government problems in relocating villages and graves from the site, which is five times the size of New York’s Central Park.

Delays in the project, which is part of Prime Minister Najib Razak’s Economic Transformation Programme and aimed at doubling Malaysians’ incomes by 2020, could slow down the economy since the oil and gas sector makes up a fifth of the country’s GDP.

Petronas, Malaysia’s only Fortune 500 company, has signed heads of agreements with Italy’s Versalis, Japan’s Itochu and Bangkok-listed PTT Global Chemical to build speciality chemical plants. Germany’s Evonik also stepped in to the project after compatriot BASF pulled out, citing differences in business strategies.

Petronas’s RAPID project includes a 300,000 barrel/day refinery, which would supply naptha and liquid petroleum gas to the chemical plants and produce gasoline and diesel for European markets.


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