JG Summit expects to conclude talks with foreign firms for naphtha project

JG Summit Petrochemical Corp. (JGSPC) expects to conclude negotiations with a prospective foreign investor for its proposed $500-million naphtha cracker plant by March next year.

Lance Gokongwei, president and chief operating officer of JGSPC’s parent firm JG Summit Holdings, said they are in continuous discussions with prospective contractors and expect to close a deal next year.

Three foreign groups based in Asia have expressed interest to join JGSPC in the construction of the naphtha cracker facility in Batangas.

A naphtha cracker plant is the grandparent of the whole plastics industry which converts a by-product in refining crude oil into petroleum products into monomers used as raw materials by the intermediate industries.

The project, which had been given the green light by the Board of Investments (BOI) on pioneer status, is expected to start commercial operation by December 2008 or early 2009 with around 300 employees.

A six-year income tax holiday, tax and duty-free importation of capital equipment will be accorded for this project.

JG Summit holds a controlling 82.28-percent stake in JGSPC while 17.71 percent is owned by Japan’s Marubeni Corp. Project financing will consist of 30-percent equity contribution and 70-percent loan.

BOI officials said this naphtha cracker plant will be beneficial to the midstream as well as downstream petrochemical industries that have long been dependent on imported feedstock.

The backward integration of JGSPC’s operations will result in combined capacities of the polyethylene plants to 350,000 metric tons (MT) a year from 180,000 MT a year and the polypropylene plants of 185,000 MT a year will be fully utilized.

An integrated petrochemical sector produces the crucial raw materials in making frames for electronics products and home appliances, packages of processed food, pharmaceuticals and a wide range of other manufactured goods, construction materials like PVC pipes, office furnishings, plus plain containers and wrappers.

With prices slightly higher than imports, JGSPC carved out for itself a large slice of the local market and reduced the volume of polyethylene imports the other year to just 27 percent of imports in 1997. In the polypropylene market, JGSPC has already grabbed 73 percent of the domestic market by offering similar products at prices at par with offers of foreign suppliers.