Taiwan firm scraps RM35b Pengerang project

Changes in the macro environment of the petrochemical industry forces company to recall its Malaysian project.

PETALING JAYA: Taiwan state-owned Kuokuang Petrochemical Technology Company (KPTC) has confirmed dropping its RM35 billion investment proposal in Pengerang, Johor, citing changes in the macro environment of the industry as a main reason.

Lin Sheng-Chung, chairman of CPC Corporation which controls KPTC, told Taiwan’s Commercial Times that the global trend of shale gas extraction has impacted on the performance of naphtha cracking.

Using ethane in shale gas as the raw material for ethylene only costs half of the amount as compared to using traditional raw material, naphtha.

Lin said since shale gas extraction is more cost-effective, the company needed to reconsider all its investment proposals abroad that were of naphtha cracking nature.

In addition, he said KPTC was making string of investments in China.

“The Malaysia investment plan has to be scrapped, but the losses incurred were only limited to preliminary research costs,” he said.

‘No official letter’

The daily previously quoted an undisclosed source of saying the decision to scrap the Pengerang plan was made in a May 6 meeting.

Kuokuang signed a letter of intent on land investment with the Johor government in July last year.

The investment proposal passed a detailed environment impact assessment (DEIA) last month, and the report is now under the scrutiny of environment ministry.

Johor Petroleum Development Corporation chief executive officer Mohd Yazid Jaafar, when contacted, said they were caught by surprise with the news report, but have yet to receive any formal response from KPTC.

He said the Malaysian government has given KPTC a freehand to conduct feasibility study until its letter of intent expires this month.

“We have sent them a couple of emails asking them to tell us what their decision is,” he told FMT.

He said even if KPTC were to withdraw, it would not affect the Pengerang Integrated Petroleum Complex (PIPC) project because they have drawn up an alternative investment scenario.

“The lot allocated to KPTC can be broken up further to suit other investors,” he said.

He also assured that the plan to relocate the affected residents will not be halted.

The DAP’s Mengkibol assemblyman Tan Hong Ping, who accompanied Pengerang residents to Taiwan last month to protest against KPTC, said the news brings little relief to the group.

He said this is because the proposed KPTC plant only makes up 10% of the entire PIPC, which covers 22,500 acres.