Thai IRPC to invest $280 MM to expand petchem output capacity
BANGKOK (Reuters) -- Thailand's integrated oil refiner IRPC Pcl plans to invest $280 million next year with an aim to expand the production capacity of a petrochemical product and boost its long-term earnings growth, a top executive said.
IRPC will increase its polypropylene production capacity by 63%, or 300,000 t from current levels, to 775,000 t by the middle of next year, President and CEO Sukrit Surabotsopon told Reuters in an interview on Thursday.
Once the expansion is completed, Sukrit said IRPC will be Southeast Asia's largest producer of polypropylene -- a synthetic resin which is a polymer of propylene, used chiefly for films, fibers, or molding materials.
IRPC, part of state-controlled PTT Pcl, Thailand's largest energy firm, is targeting an earnings before interest, tax, depreciation and amortization (EBITDA) of 29 billion baht by 2020, Sukrit said, versus 17.5 billion baht in 2015.
Sukrit, however, reiterated that IRPC will miss its EBITDA target this year due to a delay in its upstream hygiene and value-added product upgrade (UHV) project that started commercial runs in July, two months later than planned.
The UHV project, which increased IRPC's annual propylene capacity by 320,000 t, will boost the company's earnings in 2017, he said.
To underpin its margins, IRPC aims to increase the ratio of high value-added products such as polypropylene in its total petrochemicals sale volume to 55% by 2018 and 60% by 2020, from 40-42% this year, Sukrit said.
IRPC is also studying the possibility of building a 200,000-bpd refinery and petrochemical complex in Vietnam at an estimated cost of $12 billion, he said.
Earlier this year, Vietnam scrapped a $20 billion refinery and petrochemicals plant with PTT due to delays in getting construction of the project going.
IRPC operates a 215,000 bpd refinery, in Thailand's eastern Rayong province, that makes oil products - including gasoline, diesel, naphtha and LPG -- and runs petrochemical plants.
The run rate at the refinery is expected at around 180,000 bpd in 2017, stable versus 2016 as it is scheduled for a major 30-day maintenance shutdown during February and March, he said.
The UHV will be also be shut for the two months, leading to some losses in 2017 revenue. This will, however, be offset by the startup of the expanded polypropylene capacity, Sukrit said.
IRPC expects its gross integrated margin, including its refinery and petrochemical businesses, to be slightly lower than $13 a barrel next year. Over the first nine months of 2016, margins were $13.2.
While margins from the refinery business should be good next year as the company is likely to book a gain from its oil inventory as global crude prices climb, petrochemical margins could be hit by rising costs and supplies, Sukrit said.
Reporting by Khettiya Jittapong and Manunphattr Dhanananphorn; Editing by Himani Sarkar
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