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Taiwan's Kuokuang Petrochemical scraps planned integrated project in Malaysia

Highlights

Taiwan's Kuokuang Petrochemical Technology Co has scrapped plans to set up an integrated refining and petrochemical complex in Pengerang in the Malaysian state of Johor due to poor project economics, an official from Kuokang shareholder state-owned CPC Corp. said Monday.

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"It was meant to be using naphtha as a feedstock to produce ethylene, but because of the rise of shale gas as an alternative, the costs will be too high [to compete with other projects] and we won't be able to export the products," said the official, who declined to be named.

Kuokuang had submitted an environmental impact assessment report for the project to the Malaysian government in May, but the company's shareholders had already completed their feasibility study by then, deciding not to proceed with the project, she added.


"This has nothing to do with Malaysia but is based solely on the fact that the project would not be economically feasible," she said. "Right now we are waiting for the results of the report and the EIA process to be concluded. We had not proceeded beyond that so our costs were limited to just the feasibility study. We did not secure any land."

The results of the EIA report are expected in the coming days.

CPC is Kuokuang's largest stakeholder with 43%, with the rest held by other private Taiwanese companies.

Titled KPTC Malaysia Integrated Refinery and Petrochemical Development, or KPTC-MIRPD, the project was to have included a 150,000 b/d refinery, with development slated to begin by next year and startup scheduled for early 2018, the EIA report said. It was also expected to have the capacity to produce 800,000 mt/year of ethylene and 425,480 mt/year of propylene.

Kuokuang had originally announced a new petrochemical project in Changhua, Taiwan, but that plan was scrapped last year due to environmental concerns. Then, Malaysian Prime Minister Najib Razak announced in May 2012 that Malaysia would work with Kuokuang to launch a project in the country.

The CPC official said Kuokuang will now evaluate its options and might concentrate on building a new petrochemicals project focusing on "value-added products" in Taiwan.

The Kuokuang project would have rivaled Malaysian state-owned Petronas' RAPID project, which is also planned in Pengerang. The integrated complex will include a 300,000 b/d refinery but has been plagued by delays, with first production now likely by the end of 2017, from an initial target of 2016.

Petronas is also planning for naphtha to underpin its 3 million mt/year steam cracker to produce ethylene, propylene and olefins.

The increased supply of NGLs and associated ethane is expected to be used as the primary feedstock for new steam cracker projects in the medium term. In contrast, naphtha is more than three times more expensive than ethane.

Bentek Energy, a unit of Platts, expects NGLs production in the US to increase by 1.5 million b/d between 2012 and 2018. The glut of ethane has provided steam cracker operators with a cost advantage compared with producers running naphtha-fed units and has prompted renewed investment from companies including BASF, Dow, CP Chem and LyondelBasell.

--Song Yen Ling, yenling.song@platts.com

--Edited by Meghan Gordon, meghan.gordon@platts.com