Malaysia's petchem industry booms

14:14 PM | April 16, 2018 | Natasha Alperowicz

WAN ZULKIFLEE WAN ARIFFIN: PIC is Petronas's largest
downstream investment on a single site.

The chemical industry is a major contributor to the Malaysian economy, the fourth largest in Southeast Asia behind Indonesia, Thailand, and the Philippines, but biggest by GDP per capita. Petrochemicals (petchems) and oleochemicals are the two main streams. Although long-established, the Malaysian petchems industry really took off in the 1990s when several multinationals, including BASF, put down roots in the country. The three major established petchem hubs are at Kertih, Gebeng, and Pasir Gudang. Kertih is based on C1 and C2 chemistry, Gebeng on C3, and Pasir Gudang on C2 chemistry. Other sites at Labuan, Bintulu, and Gurun produce methanol; ammonia-urea; and ammonia-urea, methanol, and urea-formaldeyhde resins, respectively.

The state-owned oil and gas producer, Petronas (Kuala Lumpur), its chemicals arm Petronas Chemicals—which was listed on the Bursa Malaysia stock exchange in 2010—and Lotte Chemical Titan (Kuala Lumpur) are the leading Malaysia-based petchem players. All three have major investments under way to enhance their market leadership positions in Malaysia and overseas.

The biggest project under construction is the $27-billion Pengerang Integrated Complex (PIC), a huge site being developed at Pengerang, Johor State, near Singapore. The Petronas group’s $16-billion Refinery and Petrochemical Integrated Development (Rapid) project forms part of PIC, which will also include the Pengerang independent deep-water petroleum terminal with a total storage capacity of 5 million cubic meters.

PIC including the Rapid complex are located within a 22,000-acre site being developed by the government of Malaysia as a major energy and petchem hub, which will house polymer-conversion parks as well as other industries.

PIC is on track for overall start-up in the first quarter of 2019. The project falls under the government’s economic transformation program to establish new engines of growth. “PIC is one of the largest industrial developments in the region as well as Petronas’s largest downstream investment on a single site,” says Wan Zulkiflee Wan Ariffin, Petronas president and group CEO.

GETTING READY: The PIC will become a major energy and
petchems hub.

The Rapid project is based on a 300,000-b/d refinery that will produce petroleum products including naphtha and LPG, as well as 600,000 metric tons/year of propylene. The associated steam cracker will have a capacity of 1.3 million metric tons/year (MMt/y) of ethylene, 609,000 metric tons/year of propylene, 185,000 metric tons/year of butadiene, and 250,000 metric tons/year of raffinate-1. Downstream units owned by Petronas Chemicals will be designed to produce 900,000 metric tons/year of polypropylene (PP), 740,000 metric tons/year of ethylene glycol, 400,000 metric tons/year of flexible high-density polyethylene, and 350,000 metric tons/year of linear low-density polyethylene.

Petronas scored a major success in early 2017 when Saudi Aramco agreed to pump $7 billion into the upstream part of the Rapid project in exchange for a 50% stake in the refinery and steam cracker. Aramco will supply most of the crude oil needed by the refinery, with natural gas, power, and other utilities to be provided by Petronas.

Aramco, in a separate deal last October, agreed to acquire a 50% stake in Petronas Chemicals’ downstream polymers project for 3.8 billion Malaysian ringgit ($900 million). Aramco now owns 50% in the entire Rapid project. The first petchem production is expected to start after the refinery is completed in 2019. Sazali Hamzah, CEO of Petronas Chemicals, says PIC will provide a strong foundation for Petronas Chemicals to move into derivatives and specialty chemicals. “Beyond 2020, Petronas Chemicals will also focus on assessing opportunities in downstream derivatives and specialty chemicals at Pengerang, Kertih, Gebeng, and east Malaysia,” he says.

Lotte Chemical Titan was listed on the Bursa Malaysia last year in what was Malaysia’s largest IPO since 2012. The offering raised RM3.77 billion, which is being used to finance Lotte’s expansion in Malaysia and a new petchem complex in Indonesia. Lotte Chemical (Seoul, South Korea) owns 76.01% of Lotte Chemical Titan following the IPO .

NEW TO THE REGION: Citral plant will supply the aroma
ingredients industry.
In Malaysia, Lotte Chemical Titan operates 12 production plants and three tank farms at Pasir Gudang and Tanjung Langsat in Johor State. The two sites operate as a single integrated petchem complex. The company recently expanded its Pasir Gudang cracker from 730,000 metric tons/year to 850,000 metric tons/year of ethylene. The main focus of the expansion was to raise propylene capacity from 350,000 metric tons/year to 550,000 metric tons/year to feed an expanded PP unit at the site.

Lotte Chemical Titan recently signed a three-year contract with Abu Dhabi National Oil Co. (Adnoc) for Adnoc to supply up to 1 MMt/y of naphtha. “Demand for petchems in Southeast Asia is expanding steadily and this three-year agreement with Adnoc will ensure security of naphtha supply,” says Lee Dong Woo, president and CEO of Lotte Chemical Titan.

Several other projects are being developed in Malaysia. The government of the state of Sarawak is studying plans for an RM8.4-billion methanol plant at Bintulu. Petronas has signed an agreement for the supply of gas feedstock to state-owned Yayasan Hartanah Bumiputera Sarawak, the company developing the methanol project.

The Sarawak government says that Bintulu has the infrastructure to become a regional hub for petchem industries. It is already home to three LNG plants as well as Shell MDS (Malaysia), a gas-to-liquids (GTL) joint venture (JV) among Shell, Mitsubishi Corp., Petronas, and the Sarawak state government. The GTL complex uses Shell technology to produce gasoline, kerosene, distillate fuel oil, and lubricants.

Overseas companies are also expanding operations in Malaysia. Arkema (Paris, France), a leading producer of specialty chemicals, plans to double methyl mercaptan capacity at Kertih, in the north of the Malaysian peninsular. The product is an intermediate to make methionine and other sulfur derivatives. The expansion, expected onstream in 2020, will support the growth of the animal-feed, petchem, and refining markets in Asia and strengthen Arkema’s position in value-added thiochemicals, the company says.

Arkema’s existing Kertih complex, commissioned in 2015, was implemented under a two-part JV with CJ CheilJedang (Seoul), a food and feed ingredients, amino-acids, and pharmaceuticals company. The first JV, owned 86% by Arkema and 14% by CJ CheilJedang, produces methyl mercaptan and dimethyl disulfide. The second, owned 86% by CJ CheilJedang and 14% by Arkema, produces biomethionine using on-site methyl mercaptan.

DOUBLING IN SIZE: Arkema’s thiochemicals complex will boost
methyl mercaptans capacity at Kertih.
In January this year, BASF Petronas Chemicals, a 60-40 JV of BASF and Petronas, started up a plant for highly reactive polyisobutene at Gebeng, near Kuantan, Pahang State. The plant, with a total capacity of 50,000 metric tons/year, is the first of its type in Southeast Asia. The product is used as an intermediate to manufacture high-performance fuel and lubricant additives, including additives for sludge prevention. The expansion builds on BASF’s operations at Gebeng, one of its worldwide Verbund total-integration sites. BASF Petronas completed construction in late 2016 of a plant designed to produce 30,000 metric tons/year of 2-ethylhexanoic acid, an intermediate used to produce lubricants and oil additives. A more recent addition, in September last year, was an integrated aroma chemicals complex that produces citral and citronellol. Citral is a key intermediate for aroma ingredients.

These units form part of a second wave of investments by BASF Petronas, which celebrated its 20th anniversary last year. The first wave includes plants producing acrylic monomers—glacial acrylic acid, butyl acrylate, and 2-ethyl hexyl acrylate—oxo alcohols, and butanediol and derivatives. BASF is also an equal partner with Toray Industries in Toray BASF PBT Resin, which produces polybutylene terephthalate resin at Gebeng.

Extensive oil palm plantations have led to the creation of a major oleochemicals industry in Malaysia, starting in the early 1980s. The country is one of the two main oleochemical producers and exporters. Products include fatty acids and alcohols, methyl esters, and glycerine. The industry, which includes local producers as well as JVs with overseas players, supplies the soaps and detergents, personal-care, lubricants, and many other industrial sectors. Malaysia has 16 companies producing basic oleochemicals and 30 companies producing oleochemical derivatives.

Emery Oleochemical (Selangor, Malaysia), a 50-50 JV between Sime Darby Plantation (Kuala Lumpur) and PTT Global Chemical (Bangkok, Thailand), is a leading player. Sime Darby Plantation is the world’s largest oil palm company with approximately 1 million hectares of land across Malaysia, Indonesia, Liberia, Papua New Guinea, and the Solomon Islands. It is also the world’s largest producer of Certified Sustainable Palm Oil with an annual production of 2.3 MMt/y. Its downstream business includes oils and fats products, oleochemicals, and palm oil-based biodiesel.

Other players include Pacific Oleochemicals Malaysia; KL-Kepong Oleomas; FPG Oleochemicals, a 50-50 JV between Felda Holdings, the world’s largest producer of palm oil and palm kernel oil, and Procter & Gamble; and IOI Oleochemical Industries Malaysia.