S'pore's chemical ambition checked by its neighbors

S'pore's chemical ambition checked by its neighbors

SINGAPORE (Reuter): Singapore is forging ahead with its plan
to develop a major petrochemical production hub to service
Southeast Asia, but intense competition from neighbours is
slowing its growth, industry analysts said yesterday.

Last week, Singapore claimed a prized catch when Exxon
Chemical Co said it would go ahead with plans to build a US$2.0
billion ethylene plant at Pulau Ayer Chawan -- home to its
230,000-barrel-per-day (bpd) refinery.

But Exxon's decision raised questions over a similar project
planned for Singapore by Mobil Corp as several other such plants
are planned to start production in Southeast Asia in 2001.

"Some of those plants have a domestic market, they have a
freight advantage," said consultant Andrew Spiers of Chem Systems
East Asia.

Thailand is geared up to starting four plants, Malaysia two
and Indonesia two -- many in conjuction with leading
multinationals.

"We still feel there is room for Mobil...we have not given up
on Mobil," Philip Yeo, chairman of Singapore's Economic
Development Board (EDB) told a news conference on Friday to mark
Exxon's investment.

EDB is courting Mobil aggressively to make sure the company
does not abandon plan to build a S$1.5 billion (US$1.04 billion)
plant to 800,000 tons per year of ethylene, the basic chemical
used in making plastics.

Yeo said EDB had offered Mobil an incentive package similar to
that given to Exxon, including a tax holiday, investment
allowances and soft loans.

"Clearly it (incentives) is significant," said Warwick Bisley,
managing director of Exxon's new venture when asked to comment on
his company's choice of Singapore.

Exxon said its plant, designed to produce 800,000 tons of
ethylene a year, was the biggest it has built anywhere in the
world. The complex, including three downstream units, is
scheduled to start up in 2000.

"There is intense competition for the investment dollar within
the region and from developed countries," the EDB said earlier.

EDB is also counting on its strategy of developing an
integrated site for petrochemical production to attract more
companies.

Singapore is spending S$7.0 billion to join seven small
islands, including Pulau Ayer Chawan, into one large island by
2015.

It says the site offers the benefits of large-scale
production, good infrastructure and readily available feedstock
as well as proximity to customers.

The hub is already home to two ethylene plants operated by the
Petrochemical Corp of Singapore and a 280,000-bpd refinery by
Singapore Refining Co.

It also has committments from some of the world's leading
chemical companies such as Dupont, Eastman Chemical Co, Hoechst
AG, Chevron Chemical and Alusuisse-Lonza Holding AG to build
derivative plants.

But analysts say fresh investments are likely to come from
derivative plants -- using ethylene to make other plastics --
rather than large scale ethylene plants similar to that announced
by Exxon.