Loosening the Thais

The full version of this article can be read in the April 2012 issue of Hydrocarbon Engineering. Subscribe here to read the full article. Existing subscribers can login here to read the April 2012 issue.

The past 18 months have been eventful for Thailand’s petrochemical industry. Several major producers have begun signing important overseas acquisition and expansion deals following commissioning of the Kingdom’s sixth and seventh crackers in 2010. In March 2011, the Tohoku earthquake and tsunami disaster in Japan caused supply shortages of some petrochemical products in Asia, causing prices to rise while damaged production facilities were repaired. Just six months after the earthquake, Thailand’s petrochemical industry faced a three month disruption to its domestic market when the worst floods in 60 years inundated much of the nation's central provinces, where many of the large industrial estates are located.

Development

The first phase of Thailand’s petrochemical industry development in the 1990s involved construction of production facilities using gas based feedstocks produced from offshore gas reserves in the Gulf of Thailand. The sector’s second development phase involves the use of liquids based feedstocks.

Natural gas feedstock currently accounts for more than half of Thailand’s petrochemicals production, while other feedstocks include imported naphtha and naphtha supplies from Thailand’s own refineries. Thailand’s ethylene crackers use naphtha for approximately 45% of their feedstock requirements. Domestic petrochemical producers are keenly watching how the Thai and Cambodian governments resolve overlapping claims to untapped gas reserves in the Gulf of Thailand, which Thailand wants to use to keep its petrochemical feedstock prices low and competitive.

The second phase of development is nearly at an end and two petrochemical complexes are virtually completed. Petrochemical producers are beginning to debottleneck and to improve production, generally adding 10 – 20% production output at each respective plant. In addition, some newly installed capacity is due to be commissioned over the next 12 months. Thaioil Company will be adding 37 000 tpy of paraxylene production capacity in the last quarter of 2012, while IRPC Co of Thailand (formerly Thai Petrochemical Industry) is looking to commission 30 000 tpy of styrene monomer capacity in the first quarter of 2013.

Past problems

In spite of strong local and overseas demand for its products, reaching this stage of development has not been plain sailing for Thailand’s petrochemical industry. Although petrochemicals represent 5% of the country’s GDP, the associated environmental and political issues mean that the industry is sometimes perceived in a negative light. To help combat this, investments have been made into the latest production technology, and the industry has also has set up a health database centre on the eastern seaboard for regular monitoring of petrochemical plant staff and resident villagers in the area.

Plans to double the petrochemical industry’s capacity in 2010 were slowed by delays following a Thai court ruling at the beginning of December 2009. The ruling ordered that dozens of construction projects along the country’s eastern seaboard be suspended because of environmental and health concerns that were not fully addressed during the project planning stage.

Expansion and the future

There are approximately 600 million people living in the ASEAN region, and demand for petrochemical based products is burgeoning. Against this backdrop, Thai petrochemical consumption is still relatively low and the potential is there for growth. To achieve this, ASEAN nations must put more work into petrochemical research and development. At the present moment there is little collaboration and integration. In order to be more competitive, Thai producers perceive working with western countries as essential.

In fact, Thailand’s leading petrochemical producers are already planning further expansion to supply the growing domestic market demand for their products while simultaneously targeting exports to other Asian markets, including the Philippines and Indonesia.

Conclusion

Thai petrochemical companies are working on overseas investment deals while looking for new opportunities at home. The trend to invest abroad is partly driven by the need to spread business risk due to continuing political instability in Thailand.

Although keen to upgrade their production portfolios by using the mergers and acquisitions route to move into value added products, Thai producers are increasingly showing their ability to set up joint venture production deals in markets where they have already established an important export sales presence. As a result, new opportunities are rapidly developing to supply other Southeast Asian countries’ burgeoning petrochemical needs.

The full version of this article can be read in the April 2012 issue of Hydrocarbon Engineering. Subscribe here to read the full article. Existing subscribers can login here to read the April 2012 issue.

Written by David Hayes, Contributing Editor to Hydrocarbon Engineering

Read the article online at: https://www.hydrocarbonengineering.com/gas-processing/28032012/new_opportuntiies_for_thailand_petrochemicals_industry/