Phil Plastics Industry Ass’n questions viability of JG Summit naphtha plant

The Philippine Plastics Industry Association (PPIA) is questioning the viability of the proposed naphtha cracker plant of JG Summit Petrochemicals Corp.

According to officials of the PPIA, the proposed naphtha cracker plant will never be viable due to a number of reasons.

First and foremost, the PPIA pointed out, for a naphtha cracker plant to be viable, it should have a minimum output production of one million metric tons (MT).

However, the proposed naphtha cracker plant is projected to have an output of only 600,000 MT.

Second, the required naphtha raw material needed by the proposed plant is 1.8 million MT.

Unfortunately, the available local supply of naphtha is only estimated at below 900,000 MT.

Thus, the proponents of the naphtha cracker plant would still have to import another 900,000 MT.

The Philippines also faces strong competition from Middle East countries which are now able to harness cheap natural gas (a by-product of their oil refining operations) for their naphtha cracker plants.

After several years of talks, JGSPC, PPIA added, still has not "put its money where its mouth is" and actually started the project.

Instead, JGSPC, PPIA complained, keeps on asking for government protection with actually undertaking the project.

JGSPC, however, has recently renewed its registration with the BOI to emphasize that it is "serious" about its naphtha cracker project.

JGSPC is re-registering its naphtha cracker project since the cost of the plant has increased.

By registering the project with the BOI, the project proponent would be entitled to fiscal perks that include income tax holiday as well as tax and duty-free importation of capital equipment.

JGSPC is also seeking an extension of tariff protection for specific polymers that the proposed naphtha cracker plant would be producing.

Unfortunately, the same polymers that JGSPC is asking for continued protection are also the raw materials needed by the local plastics industry.

Government raised the tariff on affected polymers to 10 percent creating a five- percent distortion versus finished plastic products that is hurting the local plastics manufacturers.

The PPIA is thus asking the government to comply with its commitment to its ASEAN neighbors to finally bring down the tariff on petrochemical products to between zero to five percent.