Saudi Aramco eyes stake in Filipino naphtha cracker

Saudi Aramco, which owns a 40% stake in the Philippines national refinery corporation, Petron, plans to study investing in a $600 million Filipino naphtha cracker project through an additional investment in Petron. Saudi Aramco outbid all international groups, including Malaysian state oil corporation Petronas, to buy 40% of Petron a few years ago in a market that could prove to be a stepping stone into China.


MANILA�Saudi Aramco, which owns a 40% stake in the Philippines refiner Petron Corp., will study investing another $600 million in a naphtha cracker project.

Aramco outbid other international groups, including Malaysian state oil corporation Petronas, to buy 40% of Petron a few years ago in a market that could prove to be a stepping stone into China.

The naphtha cracker would help the Philippines develop its downstream petrochemical sector, as part of the country's industrialization program. Japanese and other foreign investors have urged the government and the Philippines national oil company to work out a flexible term for investment in the project, which has been facing delays for the past 3 years due to economic recession, industry sources said.

Petron's Chairman Jose A. Syjuco has indicated that Petron's participation in the cracker would be based on Aramco's assistance in ensuring crude oil supply.

It would also pull in the expertise of the Saudi Basic Industries Corp. (SABIC). SABIC is estimated to be using natural gas at a price of 25�/MMbtu for producing fertilizers.

Industry observers said Aramco would be making a strong bid for a lead role in the naphtha cracker. It could be the last petrochemical feedstock plant to be built in the Asia Pacific region for several years, due to a petrochemical feedstock oversupply in northern Asia, the revamping of the Chinese petrochemical industry, and the pending World Trade Organization (WTO) move to cut global trade barriers.

The Philippines wants to build it s petrochemical sector, which in 2003 will face trade pressure under the free trade agreement of the Association of Southeast Asian Nations. Japan, South Korea, Taiwan, Singapore and Malaysia are expected to flood the southeast Asian petrochemical markets.

Petron would use the naphtha cracker to produce polyethylene and polypropylene, which are feedstocks for plastics.

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