Taiwanese firm scraps Malaysian oil refinery due to competition from shale gas

Taiwanese refiner Kuokuang Petrochemical Technology Company (KPTC) has scrapped a plan to construct an integrated refining and petrochemical complex in Pengerang in the southern peninsular Malaysian state of Johor. According to a report, KPTC had intended to use naphtha as a feedstock to produce ethylene. However, the company has blamed the influence of the shale gas revolution in North America, and the subsequent growth of cheap, natural-gas fuelled refineries, as a primary factor that made the Malaysian project uneconomical.
The refinery was originally expected to produce 800,000 metric tons per year (mtpy) of ethylene and 425,480 mtpy of propylene and was set to rival Malaysian national oil company Petronas’ RAPID, a key refinery project that will also use naphtha as a feedstock to produce ethylene, propylene and olefins.
As high crude oil prices have seen increasingly thin margins for oil refiners globally, the abundance of cheap shale gas in the United States has seen more and more refiners in the U.S. making the switch from naphtha-based crackers to natural gas-produced ethane crackers. This has, in turn, sparked increased demand for natural gas as a feedstock to produce plastics that formerly were produced from naphtha-based refineries.
According to the Institute of Energy Economics Japan, the rise of cheaper, shale-gas fuelled refineries has further depressed the margins for Asian naphtha-based refiners, such as those in Japan, as U.S. exports of ethane-based plastics and refinery products have become more competitive due to the low cost of natural gas.
Asian refiners are increasingly seeking to focus on niche products that cannot be produced from natural gas-based ethane, such as propylene, butadiene and BTX (benzene, toluene, and xylene).
(August 19, 2013)