Petron Corp. will likely increase its capital expenditures budget for 2008 by another $200 million to $400 million with the rise in prices of capital equipment.
Nicasio Alcantara, Petron chairman and CEO, told reporters over the weekend that they have to adjust the amount that they have to pour in for their capital expenses to take into consideration the increase in prices of steel and other capital equipment.
“We think it is necessary to take a look at working capital. We have to see if we have to increase it,” he said.
He said they may also consider adding more investments for its downstream expansion.
Of the $1.5 billion that they have allocated for working capital this year, they have spent about $300 million for their petrochemical project in the early part of the year.
He said from the balance of $1.1 billion to $1.2 billion remaining capital, they may raise it again to $1.4 billion to $1.5 billion.
Alcantara earlier said the huge investments would be financed through equity and borrowing schemes.
As part of its strategy to diversify from its core business, Petron commissioned the country’s first petrochemical feedstock units last April at its Bataan refinery.
The PetroFCC, which converts fuel oil into more high-value products such as LPG, gasoline and diesel, also produces the petrochemical feedstock propylene. The propylene is further purified through the propylene recovery Unit (PRU) and is used for various industrial applications including automobile parts, electrical appliances etc.
A BTX unit is also under construction in Bataan to produce additional petrochemical feedstocks. This unit has an annual capacity to produce 22,800/MT of benzene,150,000/MT of toluene, and an additional 71,000/MT of mixed xylene.
The facility is expected to be completed by the first quarter of 2009.The company also opened a blending plant in Subic Bay recently with an annual capacity to produce 12,000 M/T of fuel additives.
Petron is now sourcing its additive requirements for its fuel brands, such as XCS Plus and DieselMax, from this facility.
This is expected not only to generate cost savings for the company, but also provide an additional source of revenue. Innospec, a global fuel additives supplier, will also be sourcing its fuel additives supply to Asian customers from this blending plant.
Petron recently launched its E10 Premium product, a new specially formulated unleaded gasoline that meets and exceeds the requirements of the Philippine Biofuels Law.
It contains 10 percent fuel grade Ethanol and 90 percent Petron premium unleaded gasoline with enhanced fuel additive. This unique additive allows the removal of existing deposits, which results in improved power and fuel economy.
“Our initiatives to diversify from our core business are beginning to give us new revenue streams that will boost our profitability in coming years,” Alcantara said.