PETALING JAYA: Petronas Dagangan Bhd, Petronas Gas Bhd and Petronas Chemicals Group Bhd (PetChem) have clarified that the fire at the Pengerang Integrated Complex (PIC) last Friday has no impact on the companies’ business.
“The incident has no financial or operational impact to our current business,“ the three entities told Bursa Malaysia today.
Last Friday, a fire and explosion occurred at the Atmospheric Residue Desulphurisation (ARDS) unit (not owned by PetChem) which is currently under commissioning stage within PIC. The ARDS unit is used to produce low-sulphur fuel oil and hydrotreated feedstocks.
“Based on our channel check, we understand that PetChem’s petrochemical plants are unaffected. Petronas has two ARDS units in Pengerang and the other ARDS unit has yet to be commissioned. Further detailed investigations are likely to be carried out in order to avoid future accidents and this may potentially delay the commercialisation process,” said Hong Leong Investment Bank (HLIB) Research.
Furthermore, it noted that operation of only one ARDS unit may also result in production bottleneck and hence capping the maximum production in the near term until the affected ARDS unit is being fully repaired and commissioned.
PIC petrochemical plants were last guided at 96% mechanical completion as of February 2019 and management is eyeing for commercialisation by October 2019.
HLIB Research said given that Pengerang’s plant is operated as an integrated model, a disruption in the value chain may affect commercialisation of the petrochemical plant.
If PIC is able to kick in on time, the research house said PetChem will increase its existing capacity by another 1.78 million tonnes per annum or 14%.
“However, we have yet to obtain clear guidance on the feedstock transfer pricing from the Petronas-Saudi Aramco’s jointly owned crackers, which will materially affect its PIC profitability. The counter, in our view, will be re-rated from current level if the contribution from PIC can be assessed in a better way.”
Meanwhile, HLIB Research said petro-chemical prices generally have staged a rebound in Q1 2019 versus Q4 2018 following the recovery of crude prices but prices are still weaker year-on-year (yoy).
“Overall, we expect to see petrochemical prices under downward pressure yoy dragged by additional supply and weaker oil prices.”
HLIB Research is maintaining a “hold” call on PetChem with a lower target price of RM9.30 from RM9.76 previously.
“Although we still like PetChem for being Petronas’ petrochemical arm to benefit from downstream long term growth, share price may experience overhang in the near term due to volatile petrochemical prices dragged by volatile oil prices and additional supply; uncertainty over potential delay in PIC; and transfer pricing on PIC’s feedstock.”
Shares of Petronas Dagangan and PetChem closed 0.16% and 0.7% higher at RM25.06 and RM8.90 respectively, while Petronas Gas was unchanged at RM17.68.
