Sabah poised to be on world map with RM13 bil petrochemical plant plan

Chief Minister Shafie Apdal (centre) witnessing the exchange of the term sheet between Burel Industries chairman Per N Brandtzag and POIC Sabah Sdn Bhd CEO Pang Teck Wai in Kota Kinabalu today.

KOTA KINABALU: Plans are in the pipeline to build a petrochemical plant in Sabah that could potentially put the state on the world map of petrochemical products.

State-owned POIC (Palm Oil Industrial Cluster) Sabah Sdn Bhd, developer of POIC Lahad Datu, and Burel Industries Sdn Bhd signed a term sheet today which will see RM13 billion pumped into POIC Lahad Datu for this purpose.

It is the single biggest investment in Sabah.

Burel is a partnership of Swiss, Saudi, Chinese and Malaysian interests.

The plan is to set up a petrochemical plant in Lahad Datu to process naphtha, a petroleum by-product, into a variety of petrochemical products for the world market.

Burel has secured a long-term supply of naphtha from a Saudi source.

Chief Minister Shafie Apdal, who witnessed the signing at his office today, hoped the term sheet would eventually lead to the realisation of the mammoth project.

“You have indeed made a wise choice to select Sabah as a location. Lahad Datu is a very important and strategic location.

“With Burel, I see an emerging industrial direction in Sabah, something the Warisan-led government is pursuing.

“Chemicals have become Sabah’s single largest industrial sector going forward,” he said.

State government leaders led by Chief Minister Shafie Apdal and Deputy Chief Minister Wilfred Madius Tangau, POIC executives and Burel Industries executives led by chairman Per N Brandtzag at the signing of the term sheet in Kota Kinabalu today.

Burel Industries chairman Per N Brandtzag, who signed on behalf of the company, said they had looked at other countries but eventually picked Sabah because of its location and favourable investment climate.

“It’s worth mentioning at this stage that although there has been great volatility in global markets, petrochemicals that will be produced by Burel will continue to not only remain resilient but will enjoy a healthy 4.2% compound annual growth rate (CAGR), which has been the case since 2000.

“Hence we remain bullish about the future, which explains why we are keen to set up a plant in Sabah,” he said.

He expected manpower needs to peak at 3,500 during the construction stage.

“Once we commence operations, we expect to employ approximately 500 direct staff and another 1,000 indirect staff.”

Brandtzag said according to a major study by the International Energy Agency (IEA), petrochemicals were becoming the largest driver of global oil demand, ahead of automobiles, planes and trucks.

“Petrochemicals are set to account for more than a third of the growth in world oil demand by 2030, and nearly half the growth by 2050, contributing to the production of nearly seven million barrels of oil a day by then.

“They are also poised to consume an additional 56 billion cubic metres of natural gas by 2030, and 83 billion cubic metres by 2050,” he said.

Petrochemicals are components derived from oil and gas that are used in all sorts of daily products such as plastics, fertilisers, packaging, clothing, digital devices, medical equipment, detergents and tyres.

Brandtzag said the demand for plastics – the key driver for petrochemicals from an energy perspective – had outpaced all other bulk materials such as steel, aluminium or cement, nearly doubling since 2000.

“Advanced economies currently use up to 20 times more plastic and up to 10 times more fertiliser than developing economies on a per capita basis, underscoring the huge potential for global growth,” he said.

Deputy Chief Minister Wilfred Madius Tangau said although Burel’s plan was to process raw material brought into Sabah, the investment would have notable impact in terms of job creation and transfer of technology.

“As the chairman of POIC Sabah, I commend the tireless efforts of the company’s management in drawing foreign investment, especially at the POIC in Lahad Datu, where the investment value to date is estimated at RM4 billion,” he said.

Tangau, who is also state trade and industry minister, said his ministry had set up a number of special task forces to redefine the state’s industrialisation priorities and hasten its development.

Burel’s investment envisages about two million tonnes of petrochecmical products which will be shipped overseas via about 70,000 containers a year as well as some products through POIC’s liquid bulk jetty.

POIC Sabah Sdn Bhd chief executive officer Pang Teck Wai signed on behalf of the company.