Petronas Chemicals plans RM3b capex this year

KUALA LUMPUR: Petronas Chemicals Group Bhd (PCG) has set aside RM3 billion in capital expenditure (capex) for 2015, of which bulk of it will be for the Sabah Ammonia Urea (Samur) project.
"The Samur project is expected to be completed and commissioned by the end of the first quarter of 2016. Upon completion, PCG will be the second largest urea producer in the region," chairman Wan Zulkiflee Wan Ariffin told a press conference after the company's AGM here yesterday.
For now, the Samur project has been 90% completed.
Besides that, the capex will also allocated for two projects at joint venture company BASF Petronas Chemicals Sdn Bhd in Gebeng, Pahang. It includes the Integrated Aroma Ingredients Complex and the specialty chemical 2-Enthylhexanoic Acid (2-EHAcid) plant.
Last year, PCG's capex was at RM3.1 billion mainly spent on turnaround activities.
Wan Zulkiflee believes the group is able to fund the existing projects considering its cash balance of RM9.2 billion.
The group is also planning to undertake a refinancing for the Samur project after its completion in 2016 in a bid to get better financing rate.
Commenting on the earnings prospects , PCG's CFO Farina Farikhullah Khan declined to make a projection, except to say that the petrochemical prices are co-related with global oil prices and will be determined by market forces.
"This year we'll feel the full impact of low oil prices, so we expect the market to recover along with the oil prices by 2016.
"If the oil prices are stabilised, it's easier for us to give a firm indication," she added.
She however said the group is ramping up its production, with an estimated utilisation rate of 80% to 85% in 2015 compared with 80% in 2014.
Wan Zulkiflee explained that the higher utilisation rate could be supported by the Dalak pipeline as it will bring in gas from new sources of supply directly to PCG's methanol facility in Labuan. The Dalak pipeline is slated for completion by the end of the first quarter in 2016.
"We've passed through turnaround season, then now we can climb up the utilistion rate," he said.
Farina expects the Aroma project to add 10% to the group's share in associated company profits upon completion and an additional 4% profits from the 2-EHAcid project.
She noted that it will be only two turnarounds for 2015 after passing through "heavy statutory turnaround" period in 2013 and 2014.
"Every year we have statutory turnaround but (for this year) it will not be heavy as many number of plants involved in the past two years," she noted.
Turnaround activity is a statutory requirement which see a mandatory shutdown to enable the plant maintenance works to take place and for safety purpose.
Farina expects PCG's production volume to be higher in 2015 due to lesser shut down days as well as operation efficiency.
For the financial year ended Dec 31, 2014, PCG's net profit dropped 19.35% to RM2.5 billion against RM3.1 billion it made a year ago.