Cancellation of elastomer project to augur well for PetChem

KUALA LUMPUR: Petronas Chemicals Group Bhd’s (PetChem) cancellation of the elastomers project at the refinery and petrochemical integrated development (Rapid) project is expected to bode well for the group, analysts generally opined.

In a report, the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) opined in light of the soft market outlook for certain petrochemicals products and continued uncertainty in the global crude oil prices, it believed that Petronas Chemicals is taking a very bold and prudent approach in its investment decisions.

“Petronas Chemicals guided that the decision to cancel the elastomer project was arrived at after taking into consideration less-than-favourable product market outlook and estimated return on investment on the project.

“In fact, the company further noted that the cancellation is expected to improve the overall returns of Petronas Chemicals investments in Rapid,” it added.

Of note, the projected investment cost for the elastomer plants is approximately US $1.3 billion of the total US$3.9 billion estimated for the total investment cost of the polymer, glycol and elastomer projects.

The other two projects (polymer and glycol) would continue according to schedule. The company noted that the cancellation of the elastomer project would result in 0.35 million tonnes per annum (MTPA) capacity reduction of the total 3.5 MTPA.

While PetChem has canceled the elastomer project, MIDF Research pointed out that the company remains committed to its other projects in Rapid namely the polymer and glycol projects.

In a separate note, RHB Research Sdn Bhd (RHB Research) noted that PetChem’s total cash stands at RM8.7 billion (US$2.2 billion) with no borrowings in its books.