JG Summit Finally to Fill Naphtha Cracker Gap for Philippine Polys Industry

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). The long wait for plans for the country's first naphtha cracker to be put in motion has caused something of a logjam in the midstream and downstream segments of the Philippines petrochemical industry.

Now, J.G Summit Petrochemical Corporation (JGSPC) has refreshed its commitment to build a naphtha cracker at its petrochemical complex in Batangas City and to have it in commercial operation by the first half of 2008. The company's COO, Wilfredo Paras, said that the 350,000-ton-per-year plant would manufacture raw materials for petrochemicals production and ensure a reliable and competitive source of feedstock for the company's existing petrochemical plants. The company's polyethylene (PE) and polypropylene (PP) plants first came on stream in 1998. Since then, a number of naphtha production projects have been proposed, but have failed to achieve lift-off.

See related July 29, 2002, news article - Clearer Investor Horizon Will See Philippine Polys Output Soar at Batangas.

JGSPC is the only player remaining in the country's midstream segment. A number of other players, including Bataan Polyethylene Corporation, Petrochemical Corporation of Asia and the Pacific Petrocorp, have closed down production facilities in Mariveles, Bataan.

"This backward integration move will go a long way in making the Philippine industry globally competitive and will definitely encourage further investments in midstream and downstream industries," said Paras. He said that JGSPC was negotiating with suppliers and conducting planning and engineering studies to determine the cost of building the facility. He did not confirm any details on securing the project financing, but added that negotiations were taking place with suppliers to finalize costs of the project.

The Manila Times reports that JGSPC was one of few midstream manufacturers who sought to freeze the country’s tariff reduction program in 2002, on condition that the industry would secure an investor for the planned naphtha cracker. Paras is optimistic that once the naphtha cracker is operating, investments in midstream and downstream industries will pour in. He said the plant would enhance the profitability of the company's operations and enable it to weather and even benefit from the cyclicality inherent in the polys business. JGSPC's 'Evalene' brand of PP and PE resins are the most widely used products in the country's commodity markets. JGSPC is a joint venture between the Gokongweis Group's JGS Holdings (Manila, Philippines) and the Marubeni Corporation (TOKYO:8002)(Tokyo, Japan).

Estimates on the cost of the cracker have averaged around $600 million since the project was first planned in 1997, but the JV put the project on hold when the government decided to form a consortium, which would have comprised of major regional and global players, through the Philippine National Oil Co, to spearhead the project. The stage was finally set for JGSCP to make a clear move on the project.