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.