SAN Miguel Corp. (SMC) on Tuesday bared plans to build a new petrochemical refinery in the Philippines worth P1 trillion, with construction to possibly start in the next six months, SMC President and Chief Operating Officer (COO) Ramon Ang said.
“[We are looking to put up] a totally new oil refinery which will produce up to 250,000 barrels a day for the Philippines,” Ang told reporters on the sidelines of the company’s annual stockholders’ meeting held in Pasig City on Tuesday.
“We hope to be able to groundbreak [the project]in the next six months,” Ang said.
“Mas stable kasi ang petrochemical products, ang pricing nila, at saka … cracking margin is more stable and more profitable and, of course, malaki rito yung domestic consumption at napakalaki rin ng export potential,” he added.
[This is because petrochemical products are more stable, their pricing, and… the cracking margin is more stable and more profitable and, of course, domestic consumption is high and the export
potential is also great.] A crack spread or margin, according to Investopedia, measures the difference between the purchase price of crude oil and the selling price of finished products that a refinery produces from the crude oil. Crack spreads are an indicator of the short-term profit margin of oil refineries.
Construction of the project will mean a new company will be established that will hold the refinery’s operations and it will be put up “somewhere in the south” of Metro Manila but Ang declined to disclose further details.
“The only reason why this project is being delayed is because of the purchase of the land,” he added.
SMC will be partnering with two undisclosed foreign firms to put up the project, which will need around 1,000 hectares of land for its construction.
The refinery will be “integrated from crude oil to white products to petrochemical,” according to Ang, and that it will also be flexible in terms of production.
The highest valued petroleum products are called white products in the industry.
“Kung maganda ngayon ang margin ng white products, maganda ‘yung demand ng gasolina, pwede nating i-switch ‘yun … ‘pag mas Malaki ang demand ng petrochemical, pwedeng magswitch to produce more petrochemicals,” he said.
[If the margin on white products is good now, the demand for gasoline is good, we can switch it… if the demand for petrochemical is bigger, we can switch to produce more petrochemicals.]
The project is targeted to be fully operational in the next three-and-a-half years.
Petron refinery expansion
SMC said it is also eyeing to expand Petron Corp.’s existing refinery from a capacity of 180,000 barrels
per day to about 270,000 per day.
“Yung existing oil refinery ng Petron today, ie-expand pa natin yun [The existing oil refinery of Petron today, we will still expand it from] 180,000 barrels per day to about 270,000 barrels a day but this is mostly going to petrochemical na [already],” Ang said at the same briefing.
“And then we are also looking for opportunities, if possible, to expand our refinery in Malaysia,”
SMC said the Petron refinery expansion will cost $800 million (P39.6 billion).
And did not disclose where the funds for the expansion will be sourced.
Petron Corp. is the fuel and oil business of SMC. Aside from Petron, SMC also holds other businesses including beverages, food and packaging (San Miguel Brewery Inc., Ginebra San Miguel Inc., San Miguel Pure Foods Company Inc.), energy and power (SMC Global Power), infrastructure (Eagle Cement Corp.), and banking (Bank of Commerce).