Joint venture pact for naphtha project may be signed in 2002

The Philippine government, Malaysia-based Petronas Oil. Co., Brunei government and some Japanese companies are expected to sign early next year a joint venture (JV) agreement to undertake the country’s first naphtha cracker plant project which is estimated to cost $600 million.

Philippine National Oil Co. (PNOC) president Thelmo Cunanan said they are currently holding "serious talks" with Petronas, Brunei and some Japanese firms.

"The negotiations are going on as scheduled. We are expecting that we could sign a JV agreement by early January," Cunanan said.

Without identifying anyone of them, Cunanan said some Japanese firms have expressed interest in investing in the proposed plant.

At present, he said they are also in the process of consolidating the guidelines set forth by each government. "We are using that (guidelines) as basis of our agreement," he said.

According to Cunanan, Malaysia’s Petronas remains interested in taking up a 20-percent equity or even more while Brunei is expected to take up 35 percent. The Japanese groups may invest about 10 to 15 percent.

The remaining 30 to 40 percent will comprise the equity of the Philippine government through PNOC’s petrochemical subsidiary, PNOC-Petrochemical Development Corp. (PPDC).

The $600-million naphtha cracker project will be funded through a combination of debt and equity. About 60 percent of the amount will likely be raised through borrowings and the remaining 40 percent will be offered to strategic investors through equity infusion.

The naphtha cracker plant is envisioned to have a capacity of 600,000 to 700,000 tons per year ot be operational by 2004 or 2005. It will manufacture raw materials that can be used by polypropylene and polyethylene plants.

PPDC said it is willing to take up at least a 34-percent stake in the project. But, PPDC’s expected shareholdings could be brought down, depending on the equity structure that would firmed up by the government.

Aside from the foreign investors, PNOC has also held talks with China Petroleum Corp. and Gokongwei-owned JG Summit Holdings Corp.

Other foreign and local investors which had expressed keen interest in the cracker plant project were: Petron Corp., Petrocorp, Bataan Polyethylene Corp., Philippine Resins Industries Inc., D & L Industries, RP Amoco, Sumitomo Corp., Mitsubishi Corp., Mitsui and Co., Itochu Corp. and Marubeni Corp.