An energy services provider has called for the restart of plant operations at Jurong Aromatics Corporation (JAC).
The US$2.4 billion (S$3.2 billion) petrochemicals facility on Jurong Island has been put out of action since last December, owing to unfavourable market conditions. Prices for aromatics, which closely track that of crude oil, were down last year, in line with plunging oil prices and oversupply in the market.
Jurong Energy Investment Corporation (JEI) told The Straits Times it has submitted a proposal to JAC to fire up the condensate splitter and the aromatics complex again.
It hopes operations at the plant will be able to resume in two months, said JEI chief operating officer Daniel Palsson.
If the proposal goes through, JEI - set up by the shareholders of two existing JAC investors, Arovin and Shefford Investments - will provide the raw material supply, working capital aand the offtake of the product.
Mr Palsson said the plan has already received the support of JAC's board, but it is still subject to approval from other relevant stakeholders and lenders.
TIME IS RIGHT
The plant has been idle for a long time. But prospects in the industry have been improving. The plant is ready technically and we have what it takes to mobilise the condensate and sell it - everything we need to move forward.
MR DANIEL PALSSON, chief operating officer of Jurong Energy Investment
"The plant has been idle for a long time," he noted. "But prospects in the industry have been improving. The plant is ready technically and we have what it takes to mobilise the condensate and sell it - everything we need to move forward."
JAC's business is mainly driven by the production of paraxylene, a raw material used to make fabrics as well as plastic bottles. The plant is designed to produce about 100,000 barrels of aromatics a day.
Ms Anu Agarwal, the vice-president of chemicals at market data provider Argus Media, noted that margins for paraxylene have improved to US$300 to US$400 a tonne in recent months.
This was largely because of a smaller supply of paraxylene, on the back of JAC's plant closure as well as that of another 1.6-million- tonne plant in China in April.
"It should be an appropriate time for JAC to restart, given the current situation," she said.
Mr Palsson believes the JAC plant is "bound to be feasible". "There will be an upturn in the industry; we know that it is cyclical," he said.
He added that the plant, which had been up and running previously, will need only three to seven days to reach production stage.
JEI has partnered Dutch commodities trader Trafigura, which will provide the condensate supply and handle both the product offtake and stock financing.
A Trafigura spokesman told The Straits Times that the company is "keen to support and get this large industrial project for Singapore back to full operations". He added: "The global petrochemicals market has been steadily improving since the beginning of the year."
But JEI's plan for the plant to resume operations is not without its challenges. JAC's shareholding structure, for instance, comprises multiple parties that could slow down decision-making, The Straits Times understands.
Its largest shareholders include South Korean conglomerate SK Group, whose energy unit SK Innovation also operates a paraxylene production facility in Korea via its wholly owned subsidiary SK Global Chemical. Chinese polyester maker Jiangsu Sanfangxiang Group and Singapore's Economic Development Board have a share in the company as well.
In addition, Ms Agarwal noted that yet another paraxylene plant in China is expected to come on board in a few months' time.
The facility by Zhongjin Petrochemical - designed to produce two million tonnes of paraxylene a year - will "again result in new supply coming to the market".
"This will put pressure on paraxylene margins again if the facility starts as planned," she said.