BASF, Petronas sign deal on petrochemicals

BASF, Petronas sign deal on petrochemicals

KUALA LUMPUR (Reuter): German petrochemical giant BASF AG signed a US$700 million joint venture agreement with Malaysia's state-owned Petronas oil company yesterday to build an integrated petrochemical complex in central Malaysia.

The companies will own and operate an acrylic acid complex capable of producing 340,000 tons a year and a 250,000 ton per year oxo-alcohol complex, a Petronas statement said.

BASF will have a 60 percent stake in the project with Petronas taking the remaining 40 percent, it said.

The world-scale plants near the central Malaysian city of Kuantan will produce feedstocks to manufacture various plasticizers and acetates for use in paints, adhesives, coatings, leather, textiles and paper, the statement said.

The complex -- consisting of eight plants making various chemicals -- would come on stream by 2001, company officials said.

"The projects to be implemented under the joint venture will take Petronas a step further in our drive to develop this country into a major regional petrochemical producer," Petronas chairman Azizan Zainul Abidin said at the signing ceremony.

"The outputs of the plants to be set up by the joint venture will make available several feedstocks for a host of downstream petrochemical projects to support the growth of the manufacturing sector in Malaysia and the region," Azizan said.

The plants will export a substantial portion of the products, mostly to Southeast Asia, executives of the companies told reporters after the ceremony.

Asked if the partners were concerned about declining refinery margins and overcapacity in the region, Petronas president Hassan Marican said that was "a general worry" in the region.

But, he said it would not affect the particular products made at the Kuantan complex.

"These are specialized products, not general petrochemical products, which I agree, are in overcapacity in the region."

"These plants are not only for present growth but for future growth. These are products required for the future," Hassan said.

BASF chairman Juergen Strube told the news conference: "We are always worried about overcapacity", but said that the Malaysian plants should flourish due to high demand growth in Asia.

BASF executives said the Asian petrochemical market was worth $500 billion a year and about 10 percent of that was in Southeast Asia.

The plant's use of propane for fuel would be a cheaper and more secure source of feedstock than naphtha, which is more commonly used in other petrochemical complexes, Petronas executives said.

Petronas will bring a nearby propane plant into the equation and BASF will contribute its acrylic acid technology, which it will transfer to Petronas, Strube said.

"Technology transfer is a cornerstone of this joint venture," he said.

He said the venture could expand to other petrochemical processes in the future.

"This is the nucleus that we start with," Strube said. "So we are building a nucleus from which future developments are possible."

Hassan agreed. "After these eight plants, who knows how many more will come on stream as we go through the chemical chain."

Strube said the Malaysian operation is one of companies three Asian centers for petrochemcials. BASF is building an integrated petrochemicals complex in Nanjing, China and is looking at expanding its three plants in Mangalore, India.