Petron taps 5 foreign contractors to undertake $1.8-B refinery upgrade

Manila Bulletin

LIMAY, Bataan, Philippines - A good mix of foreign contractors will help propel into fruition the $1.8-billion phase 2 refinery upgrade of Petron Corporation , which is being targeted for completion by the end of 2014.

The partners who will either be technology provider, supplier or contractor for the project's engineering, procurement and construction (EPC) will comprise of French firm Axens, American firm UOP LLC of the Honeywell Group; Netherlands-headquartered CB&I Lummus; American firm Foster Wheeler AG, and South Korean firm Daelim Industrial Co. Ltd.

Petron Chairman and Chief Executive Officer Ramon S. Ang said the decision to turn the oil firm's Limay facility into a more complex refinery is in line with its vision to become "the best in Asia." The facility has capacity yield of 180,000 barrels per stream day.

He noted that despite relatively lower earnings before income tax, depreciation and amortization (EBITDA) being logged by players in the oil sector as compared to other industries, the company said it decided to pursue this venture to provide the country better buffer for its oil needs. Plus, this will significantly shore up the company's revenues.

"The project doubles Petron's refining complexity, enabling it to compete more effectively with refineries in the Asia-Pacific region," the company has emphasized. The end goal, the firm chief executive emphasized, would be to strategically align its operational efficiencies with what the best in the Asian region can offer.

Funding for the project will come from export credit lines of suppliers, plus equity infusion from Petron. The construction will immediately commence after yesterday's groundbreaking.

Apart from continued capital rollout for its Limay refinery, Petron is also looking for prospective investments overseas "if there are refineries which are being sold," according to Mr. Ang.

The oil firm's Refinery Master Plan Phase 2 (RMP-2), according to Mr. Ang, "will further enhance the country's supply security, increase Petron's capability to supply the increasing demand for white products", including those for liquefied petroleum (LPG), gasoline and diesel; as well as petrochemicals.

The facility will also provide "petcoke" (petroleum coke) fuel requirements for the proposed 70-megawatt on-the-fence power project which will satiate the refinery's power supply. This project will command separate investment of P10 billion.

Specifically, the refinery's added refurbishment will enable it to produce higher quality fuels, to the level of Euro 5, hence surpassing the emissions level set for fuels that would eventually be sold to end-users.

"This means that the company can run its refinery 100% without incurring penalties from producing low-value fuel oil," the oil firm has qualified.

Upon the project's completion, Petron said its refining facility would be able to "digest a wider range of crude oils including from African sources." In effect, this will give it greater flexibility on its crude sourcing, including cheaper and heavier crude grades, which the company considers a more cost-efficient approach on procurement.

"Petron's operational efficiency will also significantly improve since the project allows the full conversion of all remaining black streams into high-margin white products and petrochemicals," the company noted.

Axens, in its own statement to the press indicated that, Petron awarded it the license for the second fluidized catalytic cracking (FCC) unit at its Limay refinery. FCC units integrate the most advanced components for propylene production.

With the propounded blueprint for the refinery's revamping, the oil firm would be able to jack up its propylene production by up to 200-percent. Propylene is a feedstock in plastic resins manufacturing, which in turn are used in the production of home electrical appliances, automobile parts and detergent additives, among others.