PTT cancels Malaysia venture

The SET-listed PTT Global Chemical Plc (PTTGC), Thailand’s largest petrochemical producer, has decided to cancel its US$200-million petrochemical project in Malaysia due to lower-than-expected returns.

Through a joint venture with the Malaysian national oil and gas company Petronas and Japan's Itochu Corporation, the downstream petrochemical project in Pengerang, Johor state, is set to produce polyol and poly carbonate for the automotive parts industry.

The three investment partners signed a "head of agreement" in Malaysia in May 2012.

Bowon Vongsinudom, PTTGC's chief executive and president, yesterday said the feasibility study showed that the project has Internal Rate of Return (IRR) of less than 15%.

''That IRR is not justified under our benchmarked investment return,'' he said.

However, PTTGC may consider investment in such downstream petrochemical products in Thailand after the joint venture in Malaysia is terminated, said Mr Bowon.

Meanwhile, other foreign investments of PTTGC will proceed as planned including a downstream petrochemical joint venture in China with Sinochem and a project in Indonesia co-invested with the national oil firm Pertamina.

Details of the two projects are expected to be finalised in the second half of this year, he said.

"The petrochemical industry in Asia will recover this year due to rising demand from China and the US although the supply glut will continue," Mr Bowon said.

PTTGC projects gross refining margin will stay in a range of $5 a barrel this year, up from $4.37 last year and $5.80 in 2012.

Average margin of commodity plastic resins this year would also improve including that of high density polyethylene at $1,530 per tonne compared with last year's $1,480, $1,658 for low-density polyethylene from $1,534 last year. The forecast bases estimated Dubai crude price at $105 per barrel.

Last year, PTTGC reported the total revenue of 549 billion baht in 2013, down by 2% from 2012, with net profit also sliding 2% to 33.3 billion baht due to disruption of feedstock from PTT's fifth gas separation plant during the second half of last year.

Mr Bowon said PTTGC will continue with its excellent operation (EO) programme initiated last year as the cost saving measures would enable it to save cost by more than four billion baht.

In 2013, the EO measures helped the company to cut cost by five billion baht to offset the loss from oil spills in Koh Samet and feedstock disruption, he added.

PTTGC has announced a five-year capital expenditure of 4.5 billion baht through 2018.

Shares of PTTGC closed yesterday on the SET at 71.75 baht, down 25 satang, in trade worth 327 million baht.

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