04-12-2008: Petronas shuts down Kertih plants

by Tony C H Goh
Email us your feedback at fd@bizedge.com


KUALA LUMPUR: National oil company Petroliam Nasional Bhd (Petronas) has shut down its polypropylene plants in Kertih as the slowing global economy is leading to a drop in demand for the petroleum byproduct.

“Our plants in Kertih are no different from the other oil majors, the lower demand has lead to extra capacity and the temporary shutdown, but we are unsure how long it is going to last,” Petronas president and chief executive officer Tan Sri Hassan Merican said after the opening of the International Petroleum Technology Conference (IPTC) here yesterday.

He added that despite the fall in prices, resins produced at the plants in Kertih had also been stacking up as these products were considered consumer products that would be the first to be hit by the slowdown in demand.

Petronas has polypropylene plants in Kertih and Kuantan, and another fertiliser plant in Gurun, Kedah besides plants producing vinyl chloride monomer/polyvinyl chloride in Kertih.

On the current low crude oil prices and its impact on investment in the oil and gas sector, Hassan said investment strategy in the industry was not based on current oil prices, as oil as a commodity would have price fluctuation.

But he said the company had to look at the investments in Malaysia and its overseas ventures separately.

“Investments in Malaysia, we have to take into account the overall production need of the country. It is the projects overseas that we have to look at the demand and overall cost of production,” he said.

He added that the cost of production had gone up more in percentage terms compared to the rise in price of oil. “We have yet to see any major price movements for oil rigs, as exploration and development activities are still continuing,” he said.

Crude oil prices have dropped by about US$100 (RM363) or 68% from its July peak of US$147 per barrel, and are currently trading at around US$47 per barrel.

In his speech at the conference, Hassan said the situation facing the industry now was in stark contrast to that during the previous IPTC in December 2007, when crude oil was traded at around US$98 a barrel and was still climbing.

“It is hard not to let recent events to prompt us into rethinking our approach to the business with the present volatile environment. But there was also a sense of urgency to grow the global supply capacity to accommodate the increasing energy demand, especially in the emerging economies of China and India,” he said.

http://www.tranungkite.net/v8/modules.php?name=Forums&file=viewtopic&t=537