Published in ICIS Chemical Business, Sept 5-11, 2016 Issue written by Pearl Bantillo

Company president Patrick Go sees petrochemicals in the sweet spot, and says the time is ripe for a major expansion

JG Summit Petrochemicals Group, the sole cracker operator in the Philippines, is pursuing a $500m-$600m expansion over the next three years as it is bullish on the domestic growth prospects of the industry, the group’s top executive told ICIS.

“We think [the] petrochemicals [industry] is in a sweet spot right now because of the price of crude and naphtha and we think the derivative market will be stable,” said Patrick Go, president and chief operating officer of JG Summit Petrochemical Corp and JG Summit Olefins Corp.

“We’re taking a long-term view that it will stay like this for the long term, so we decided to invest – expand the cracker while the opportunity is there,” he said.

The company has an integrated petrochemical complex located in Batangas, 120 kilometers south of Manila.

It houses a naphtha that can produce 320,000 tonnes/year of ethylene and 190,000 tonnes/year of propylene, as well as downstream polymer plants.

The cracker’s ethylene capacity will be increased to 480,000 tonnes/year, while propylene capacity should rise to 240,000 tonnes/year.

DOWNSTREAM EXPANSIONS

Production at the polyethylene (PE) and polypropylene (PP) plants will also increase. JG Summit Petrochemicals has capacities of 160,000 tonnes/year of high density PE (HDPE); 160,000 tonnes/year of linear low density PE (LLDPE); and 190,000 tonnes/year of polypropylene (PP) at Batangas, according to ICIS data.

“For the expansion, it’s $500m-600m because it will involve other derivatives,” Go said.

“Basically, we are investing in a new polymer plant, expanding our polypropylene plant. We’re also investing in BTX [benzene, toluene, xylene] extraction and BD [butadiene] extraction,” he said. The expansion project will take three to three-and-a-half years to complete, he said.

“We have already signed up technology agreements for most of the projects. The only open one is for polyethylene. So we still have to make a decision on the technology to invest in. But other than that, the BTX, BD the expansion, all these are going through basic front-end engineering,” Go said.

After expansion, JG Summit Petrochemical expects to produce around 160,000-170,000 tonnes/year of combined BTX and 80,000-90,000 tonnes/year of BD – most of which are expected to be exported, Go said.

It will be using the process technologies of Lummus/BASF for butadiene (BD) extraction and of GTC Technology for benzene-toluene-xylene (BTX) extraction.

The cracker currently yields about 280,000 tonnes/year of pyrolysis gasoline (pygas); and between 110,000-120,000 tonnes/year of mixed C4, from which BTX and BD can be extracted, respectively. “Right now, we sell [pygas and mixed C4] as a full stream. After the expansion, we will be extracting the components,” Go said.

At the end of the cracker’s expansion, its pygas yield will increase to about 300,000 tonnes/year, while its mixed C4 output will rise to about 200,000-210,000 tonnes/year, Go said.

“BTX stream will be about 60% of the 300,000 tonnes. The exact percentage will change depending on the quality of the naphtha we buy, but we expect 60% to be BTX. And the BD, it should be about 40% of 200,000 tonnes,” he stated.

For the PE plant, about 30-40% of its output will be sold within the domestic Philippines market, while the rest will be shipped out, he said.

“[For] PE, we will have an extra 160,000 tonnes, but we’re thinking we will have [something] a little bit bigger. It will be a separate plant,” said Go.

SALES GROWTH TARGETS

For this year, the group is targeting a revenue growth of 10-15%, and possibly 20% in 2017, backed by high utilization rates at its plants; Go said.

“Most of this will come from operational efficiencies. We were running at much lower rates in 2015,” Go said.

According to the JG Summit Holdings, its petrochemical operations posted a 6.8% year-on-year increase in first half 2016 gross revenues to Philippine pesos (Ps) 13.0bn, with net income surging to Ps2.43bn from Ps490.4bn in the previous corresponding period.

For the full year 2016, the petrochemical plants should be able to post an average operating rate of 80-85% taking into account production hiccups throughout the year, although the company tries to run the plants at 98-99%, according to Go.

“Right now, when we are doing is we are filling a gap – there’s no petrochemical supply in the Philippines to begin with. That’s why the rate of growth for us was big – we are able to run at high operating rates right away,” Go said.

The cracker started commercial operations in November 2014, when crude prices had been spiraling downwards on oversupply concerns, pulling down naphtha prices. The slump in crude and naphtha prices in recent years has had a net positive effect on the company operations, he said.

“Nobody saw that coming, so when it happened, we might as well make advantage of it. It lowered our working capital requirements, it made products more affordable. We think demand will stay healthy, so overall we see it as a positive,” Go said.