US$2.4 billion project hits funding snag
Jurong petrochem plant delayed as global credit crisis affects its financing schedule
Ronnie Lim, Business Times 16 Oct 08;
(SINGAPORE) No thanks to the global financial crisis, a planned US$2.4 billion petrochemical investment on Jurong Island has been delayed as it has not been able to close its project financing so far.
Jurong Aromatics Corporation (JAC) had earlier indicated that it would start construction of its US$2.4 billion aromatics complex by this year-end, once it completed financial closure in the third quarter.
But asked for an update by BT, JAC director Ewe Ee Foong said yesterday: 'JAC has already completed the first phase of its debt financing in Q3, with more than US$1 billion already raised. However, given the current economic and financial climate across the world, it is only realistic to expect some delays for the conclusion of the project financing.'
Mr Ewe, however, did not give an expected date for this.
Meanwhile, construction here of two other giant petrochemical complexes of Shell (US$3 billion) and ExxonMobil (US$5 billion-plus) remains on track however, although sources said there are apparently minor hitches to some other projects there.
But by and large, the announced mega oil/ chemicals projects here - including the $700 billion first phase of Jurong Rock Cavern for underground oil storage - have not been adversely hit by the global downturn so far, BT understands.
As for JAC, Mr Ewe only said that the consortium 'remains committed to building the Jurong Island facility', and that 'JAC is working closely with its partners to ensure that financing for the project is comprehensively structured to robustly withstand global economic and financial volatility.'
JAC is 60 per cent owned by Jurong Energy Corporation - a group led by Vijay Goradia and M Y Ling, both founding members of the Continental Chemical Group. The remainder 40 per cent is held by Swiss trader Glencore, South Korea's SK Energy and Kuwait's Ikarus Petroleum (each holding 10 per cent), and Jiangsu Sanfangxiang Industrial Group (China's largest polyester producer) and Singapore's EDB International (with 5 per cent each).
In July, JAC said that while 37 per cent of the project's US$2.4 billion will come from equity, it needed to secure US$1.55 billion of debt financing, of which it had obtained close to US$1 billion at that time.
JAC's latest financing hitch means that construction of the 1.5 million- tonne aromatics complex will now have been delayed by a year at least.
It had earlier already lined up feedstock/end-product deals like its US$10-billion plus one with BP, although industry sources, including potential customers, said that 'things had suddenly gone all quiet on the JAC front recently'.
But other mega projects on Jurong Island remain on track. Germany's Lanxess which is building a 400 million euro (S$828 million) synthetic rubber project - its largest investment ever - is planning to break ground in January.
The project has not been affected by the global credit crunch as it will be funded from 'existing cash flow', Lanxess chairman Axel Heitmann told BT in Cologne last month.
Shell's US$3 billion petrochemicals complex is also expected to reach construction peak - with 8,000 workers employed - 'soon, by year-end', a Shell spokesman said yesterday, adding that over 5,000 workers are now on site. 'Everything's on schedule,' he said, with the 800,000 ethylene cracker and other downstream plants there targeted to start up in late-2009/early 2010.
BT understands that it's the same at ExxonMobil's US$5 billion-plus Singapore Parallel Train project, or its second petrochemical complex, although one source hinted that there are some apparent delays, caused mainly by a shortage of engineers, at some related projects.
Tenders for both the construction and operatorship of the first S$700 million phase of the Jurong Rock Cavern are still being evaluated and should be awarded soon, by year-end, a JTC Corporation spokewoman told BT, maintaining that the underground oil storage project is still on stream.
Summing up the picture for energy projects here, Economic Development Board assistant managing director Aw Kah Peng told BT yesterday that in the light of the current global crisis, 'there is a lot of uncertainty and people are looking much harder at their projects. But we are not seeing any major projects here affected yet'.
