Project Investments on Singapore's Jurong Island Deferred Amid Economic Slowdown

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Researched by Industrial Info Resources (Sugar Land, Texas)--The prevalent financial turmoil worldwide is taking its toll on Singapore's Jurong Island as major investors, including Lanxess AG (FRA:LXSG) (Leverkusen, Germany) and Jurong Aromatics Corporation (Singapore), are withdrawing from proposed investments or indefinitely delaying projects in the region. The situation is further aggravated with utility firms consequently holding back multibillion-dollar investments in cogeneration power projects that would have supplied power and steam to the industrial region.

In October 2008, Jurong Aromatics decided to postpone a proposed $2.4 billion aromatics complex because of financial hiccups. The firm had been expecting to achieve financial closure in the third quarter of 2008 and was scheduled to commence construction of the 1.5 million-ton-per-year facility by the end of last year to annually produce 2.5 million tons of oil products, 800,000 tons of paraxylene, 450,000 tons of benzene, and 200,000 tons of orthoxylene. However, the firm raised more than $1 billion in the third quarter of last year and expected indefinite delays in the conclusion of project financing, given the tight credit situation in the global market.

In December 2008, Lanxess, an international chemical firm, shelved plans to set up a butyl rubber manufacturing facility on Jurong Island. The firm had planned to commence construction of the $835 million facility in January 2009 to tap into the growing demand for synthetic rubber in Asia. The unit was to be developed over 20,000 square meters and was scheduled to go on stream by the end of 2010. Lanxess now expects operations to commence in 2012. The firm cited reduced global demand and the need to exercise thrift in 2009 that is likely to be a difficult year as reasons for postponing the project. Lanxess also shelved capacity expansion projects at plants in Belgium and Germany.

Earlier this month, Singapore Petroleum Company Limited (SIN:S99) (Singapore) said it was reviewing the feasibility of proposed investments. The firm is likely to scrap plans to invest $200 million to $300 million in a green ultra-low-sulfur gasoline project and an additional $100 million in a proposed cogeneration plant with a capacity of 60 megawatts (MW) to 70 MW because of the economic downturn.

In September 2008, Tuas Power Limited (Singapore), an electricity solutions provider, announced plans to set up a clean-coal/biomass cogeneration power plant for $2 billion. However, with potential customers like Lanxess putting off projects for a year, Tuas Power has decided to shelve its cogeneration power project for a period of six to 12 months.

SembCorp Industries Limited (SIN:U96) (Singapore), an engineering services organization, is also withholding the development of a proposed second cogeneration plant that would be based on heavy fuel oil and alternative refuse-derived fuel.

Electricity wholesaler and retailer PowerSeraya (Singapore) had begun construction of a 1,500-MW cogeneration plant to produce cooling water, electricity and steam for the industrial facilities in the region. The $800 million project is scheduled for completion by the end of 2009 or early 2010. However, with the onset of the financial crisis worldwide, there has been no update on the firm's plans to develop a second desalination unit and a booster unit to extend the reach of cogeneration power plants to petrochemical production units farther away on the island.

Despite the slew of investments that are being deferred, Shell (NYSE:RDS.A) (The Hague, The Netherlands) and ExxonMobil (NYSE:XOM) (Irving, Texas) continue to forge ahead with the construction of their petrochemical facilities on the Island. Shell is setting up a $3 billion petrochemicals complex to annually produce 800,000 tons of ethylene, 750,000 tons of monoethylene glycol, 450,000 tons of propylene, 230,000 tons of benzene and 155,000 tons of butadiene. The facility is expected to commence operations by late 2009 or early 2010. ExxonMobil's $5 billion petrochemical complex includes a world-scale steam cracker unit to produce 1 million tons per year of ethylene from oil products. The complex will also include two 650,000-ton-per-year polyethylene units and a 450,000-ton-per-year polypropylene unit. The project is scheduled to be commissioned in early 2011.

However, these projects are not likely to generate business for local utility firms. ExxonMobil is developing a 220-MW cogeneration plant in addition to a 150-MW power plant to address in-house power requirements. Shell is also resorting to captive cogeneration plants to meet power requirements.

Another project on Jurong Island that did not suffer delays because of the economic crisis is the methyl methacrylate factory designed by Foster Wheeler Limited (NASDAQ:FWLT) (Clinton, New Jersey) and built for Lucite International Limited (Southampton, United Kingdom), one of the world's top producers of acrylic monomers. The unit, which has a production capacity of 120,000 tons per year, began production at full capacity in December 2008 and will cater to the Asian market.

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