Business

Tuesday July 5, 2011

Sipitang plant to double PCG’s urea production

By JOHN LOH
johnloh@thestar.com.my


PETALING JAYA: With a proposed new RM4.5bil world-scale fertiliser plant, Petronas Chemicals Group Bhd (PCG) is prepared to meet the growing demand for urea in the Asia-Pacific region.

PCG on Thursday announced plans to build the plant in Sipitang Industrial Park, Sabah, to add to its existing fertiliser production facilities in Gurun, Kedah and Bintulu, Sarawak.

The new plant will almost double PCG's total production capacity to 2.6 million tonnes per annum (mtpa), potentially making the company the second largest urea producer in South-East Asia in 2015 when the project is expected to be completed.

PCG is currently the third largest urea producer in South-East Asia, a Maybank Investment Bank Bhd (MIB) analyst said.

Demand for urea is on the rise in the Asia-Pacific region.

In its report, MIB said Asia Pacific's consumption rate of urea had significantly outpaced the world average growth rate and it was also the world's biggest consumer of urea with 45% share in 2009.

MIB said world demand for urea was growing at a 12-year CAGR of 3.3%. Demand in Malaysia and Asia Pacific was even greater at 4.8% CAGR due to increase in plantation acreage and farmers intensifying efforts to enhance plant yields.

According to OSK Reseach, changing food consumption patterns and Asia's growing population were also factors boosting fertiliser demand.

PCG's fertiliser division was already maxed out with capacity utilisation of over 90% and it needed more capacity to satisfy the growing demand, said MIB.

One of Petronas Chemicals plants.

However, the project is not expected to have any impact on earnings forecasts for financial year ending March 31, 2012 and the share target price as it will be completed in 2015. Construction is scheduled to start in the second quarter of 2012.

The project will be managed by special purpose vehicle, Styrene Monomer (M) Sdn Bhd, which was just purchased by PCG and will be renamed Petronas Chemicals Fertiliser Sabah Sdn Bhd. The name change is pending approval from the Companies Commission of Malaysia.

The project is also conditional upon reaching agreement with the Sabah government on land-related matters.

OSK Research and MIB have maintained a buy call for PCG.

  • E-mail this story
  • Print this story
  • Bookmark and Share