JG Summit sets bid for construction of P26.25-B naphtha cracker project

JG Summit Petrochemical Corp. (JGSPC) is set to bid out today (Aug. 25) the contract for the construction of its planned P26.247-billion naphtha cracker project.

JGSPC president Wilfredo Paras said there are at least three interested Asian bidders for the construction project.

He did not identify who the three interested bidders are.

However, while the bidding will be conducted today, Paras clarified that the evaluation and awarding of the bid would probably take two to three months as the bids would still have to be studied and further clarifications would have to be made on the parameters of the bids.

Based on such a timetable, Paras estimates that actual construction may start only by the end of the year.

Paras and members of the Board of JGSPC led by Lance Gokongwei yesterday paid a courtesy call to Trade and Industry Secretary Peter B. Favila and updated him on the progress of the long-delayed naphtha cracker project.

According to Paras, once the winning bidder is known, JGSPC could then proceed with the financial closing of the funding for the project.

Paras explained that part of the financing , or about 30 percent, for the project would come from an export credit agency and thus, who ever is the winning contractor would determine which export credit agency would be approached to extend the needed financing.

The bulk of the financing or 70 percent would come from bank loans.

JGSPC, Paras said, did not press Favila about the tariff protection for the petrochemical industry.

However, Paras admitted that JGSPC is still seeking some clarification from the Cabinet-level Tariff and Related Matters Committee regarding the post-operative tariff protection for the petrochem industry once the naphtha cracker project becomes operational.

JGSPC’s naphtha cracker project has been registered with the Board of Investments (BOI) as a pioneer domestic producer of ethylene, propylene, pyrolysis gas and other by-products.

Based on its application documents with the BOI, the JGSPC naphtha cracker project would have a cost of P26.247 billion to be financed primarily from loans amounting to P18.373 billion and equity contribution of P7.874 billion.

The JGSPC naphtha cracker project, however, is scheduled to start commercial operation by December 2008.

The projected output of JGSPC is 318 metric tons of ethylene, 189 MT of propylene, 218 MT of py gas, 150 MT of fuel gas (for JGSPC’s own use) and 28 MT of fuel oil (of which 16 MT or 58 percent would be for JGSPC’s own use and 12 MT or 42 percent for sale).

JGSPC’s major stockholder is JG Summit Holdings, Inc. with 82.28 percent, followed by Marubeni Corp. with 17.71 percent.

The JGSPC naphtha cracker project to be located in Batangas would be the first in the country and would complete the full integration of the petrochemical industry, cutting down dependence on imported ethylene and propylene feedstock.