THE PHILIPPINE PETROCHEMICAL

INDUSTRY

I. Product Coverage

Table 1. Product Coverage of Philippine Petrochemical Industry

H.S CODE PSCC DESCRIPTION

3901.1000 5711100 Polyethylene having sp g of less than 0.94, in primary
forms
3901.2000 5711200 Polyethylene having sp g of 0.94/ more, in primary forms
3901.3000 5712000 Ethylene-vinyl acetate copolymers, in primary forms
3901.9000 5719000 Oth polymers of ethylene, in primary forms
3902.1000 5751100 Polypropylene, in primary forms
3902.2000 5751200 Polyisobutylene, in primary form
3902.3000 5751300 Propylene copolymer, in primary form
3902.9000 5751900 Polymers of oth olefins, in primary forms
3903.1100 5721100 Polystyrene, expansible, in primary forms
3903.1900 5721900 Oth polystyrene, in primary forms
3903.2000 5729100 Styrene-acrylonitrile (san) copolymers, in primary forms
3903.3000 5729200 Acrylonitrile-butadiene-styrene (abs) copolymers, in
primary forms
3903.9000 5759900 Oth polymers of styrene, in primary forms
3904.1000 5731101 Polyvinyl chloride homopolymer, suspension type, in
primary form
3904.2100 5731109 Oth polyvinyl chloride, not mixed w/ oth substance, in
primary forms
3904.2200 5731300 Polyvinyl chloride, plasticized, in primary forms
3904.3000 5739100 Vinyl chloride-vinyl acetate copolymers, in primary forms
3904.4000 5739200 Oth vinyl chloride copolymers, in primary forms
3904.5000 5739300 Vinylidene chloride polymers, in primary forms
3904.6100 5739401 Polytetraflouroethylene, in primary form
3904.6900 5739409 Oth flouro-polymers, in primary form
3904.9000 5739900 Oth polymers of vinyl chloride/oth halogenated olefin,
primary forms

The industry is currently oriented towards downstream operations. These

operations involve the manufacture of synthetic resins (i.e., polyvinyl chloride (PVC) and
polystyrene (PS) and the most recently produced polypropylene (PP) and polyethylene

1
(PE)) primarily for the plastic processing, surface coating and textile industries. The
limited scope of the industry is due to the inadequacy of local upstream facility to supply
the necessary basic raw materials (i.e., ethylene and propylene), which are currently
being imported. More midstream facilities could be established once the naphtha
cracker is in place. The manufacture of petrochemicals is considered a strategic
industry as it has extensive forward linkages practically covering all sectors (industrial,
agricultural, mining and services) and numerous applications as well as impact on total
output. As a result, the industry is considered a very important sector of the economy.

II. Definition
Petrochemicals are organic compounds derived from petroleum raw materials
(called naphtha) or natural gas or a derivative produced from such a substance by
chemical reaction, e.g., ammonia, carbon black and thousands of organic chemicals.
Petrochemicals are commonly referred to a plastics or synthetic resins. We can use
crops as substitutes for petrochemicals.

This industry comprises establishments primarily engaged in converting

feedstocks derived from petroleum, or from petroleum and natural gas liquids, into
petrochemicals.

Some important processes used in petrochemical manufacturing include steam

cracking and steam reforming. For the purpose of defining this industry, petrochemicals
consist of acyclic (aliphatic) hydrocarbons and cyclic aromatic hydrocarbons.

ƒ Acyclic (aliphatic) hydrocarbons, made from petroleum or natural gas liquid

feedstocks
ƒ Cyclic aromatic hydrocarbons, made from petroleum or natural gas liquid
feedstocks
ƒ Benzene, made from petroleum or natural gas liquid feedstocks
ƒ Ethylene, made from petroleum or natural gas liquid feedstocks
ƒ Styrene, made from petroleum or natural gas liquid feedstocks

III. Philippine Petrochemical Industry

Industry Structure

Per latest records from the Board of Investments, the Philippines has only one
(1) active producer of polyvinyl chloride) PVC, i.e., Philippine Resins Industries, Inc. and
two (2) producers of polystyrene (PS) i.e., D & L Industries, Inc. and Philippine
Petrochemical Products, Inc. In January and October 1998, respectively, another 2
world-class, world-scale plants have been built and commercially operated, i.e., the
polypropylene (PP) plant of Petrochemicals Corporation of Asia-Pacific (ceased
operations in December 2003), and the polyethylene (PE)/PP plant of JG Summit

2
Petrochemicals Corporation. In February 2001, the PE plant of Bataan Polyethylene
Corp. started operations but has ceased operations on July 2001.
Table 2. Petrochemical Plants Currently Operating in the Philippines
CAPACITY PLANT BRAND NAME
PRODUCT NAME OF COMPANY (1,000 MTPY) LOCATION
PP Petrochemicals Corp. of 225 Bataan
Asia-Pacific*
JG Summit 180 Batangas Evalene
Petrochemical City
Corporation
PE JG Summit 175 Batangas Evalene
Petrochemical City
Corporation
Bataan Polyethylene 275 Bataan
Corp.**
PVC Phil. Resins Industries, 70 Bataan
Inc.
PS D & L Industries, Inc. 18 Quezon City Hi-Flo
Hi-Flex
Phil. Petrochemical 14 Cavite Styrophil
Products, Inc. (PPPI) Styropearl
Alkylbenzene LMG Chemicals 25 Batangas
Corporation
Phthalic RI Chemical Corporation 14 Pasig City
Anhydride (formerly Resins, Inc.)
Formaldehyde Borden International 28
Phils., Inc.
RI Chemical Corporation 40 Pasig City
(formerly Resins, Inc.)
Emulsion Borden International Polyco
Polymers Phils., Inc.
D & L Industries, Inc. Quezon City Acrybond
Acrylite
Kemwerke, Inc. 25 Pasay City
Pacific Products, Inc. Cavite Adocryl
Polymer Chemicals Taguig
Polyester D&L Polycol
(unsaturated) RI Chemical Corporation
PPPI 10 Cavite Polyset
Kemwerke Pasay City
Pacific Products Cavite Adopol
Polyamide Pacific Products 1 Adomid
Wolfamid
Nylon 6 Fibers Fibertex 14 Taytay

*ceased operations in December 2003

** ceased operations in July 2001

3
Raw Materials

Monomers, a derivative of naphtha cracking are used in the manufacture of

plastic resins.
Monomers are:
-ethylene
-propylene
-styrene
-vinyl chloride

Investment Cost

The entry in the petrochemical industry requires large capital outlay. The
capitalization of the largest existing firms in the industry as of 1997 was almost P3
billion. Thus, difficulties may be met in terms of required capital investment.

Size of the Market

The size of the local market limits market participation to very few large firms.

Marketing

Individual firms in the industry engage in direct selling and require a minimum
purchase volume. User industries confirm that the petrochemical industry has an
efficient delivery system, and preferred/established customers can ever request for split
delivery on orders.

Access to Infrastructure

Improvement of roads is viewed as a complement to an efficient delivery system,

which is already provided by individuals in the industry.

Comparative Advantage

With its large pool of easily trainable, well-educated, English-speaking human

resources, the Philippines has the comparative advantage among its Asian neighbors.

Feedstock (naphtha) supply is available locally from the two (2) existing oil
refineries (Petron and Shell, Caltex has since closed its refinery and imports it
requirements from its Singapore refinery). Petron's Limay, Bataan refinery has a crude
processing capacity of 180,000 barrels/day. Pilipinas Shell has a 153,000 barrels/day
refinery. Overall, Philippine refineries run at around 80% of capacity.

4
Competitive Advantage

The Philippine petrochemical industry will compete primarily with petrochemical

producers in other ASEAN countries. With the future virtual elimination of tariffs on most
petrochemical products, the Asian region will become highly competitive in the next
century. Imports of competitively priced commodity plastics will compete with locally
produced products for a share of the Philippine market, and Philippine producers will
seek export opportunities to maximize plant operations.

While the country, in terms of the development of the local petrochemical

industry is a decade behind compared with Malaysia, Indonesia, Singapore and
Thailand, this can be turned into an opportunity for greater growth, as it allows the
adoption of state-of-the-art technology compared to most petrochemical plant in the
region, which have been in operation for quite some year.

Investment Opportunities

The successful development of a viable domestic petrochemical industry will

depend on many factors. Key among them are the growth of the Philippine economy,
government policies regarding investment incentives, competing projects in other
ASEAN countries, and the growth of the downstream plastics fabrication and textile
industries. (Plastics exports amounted to $183.7M in 2003, up 5.5% from the previous
year; garments and textiles exports earned $2.8 billion in 2003).

Investment Policies

In the 2004 Investments Priorities Plan (IPP), petrochemicals is included under

the Other Preferred Activities section. It covers upstream and midstream activities.

Linkage of the Industry

The petrochemical industry is primarily concerned in the production of plastic resins.

Plastic resins are used in a wide range of applications. Monomers, a derivative of
naphtha cracking, are used in the manufacture of these resins. Using a process known
as polymerization, the monomer molecules are linked in long chains to form polymers.
These polymers are polyethylene (PE), polypropylene (PP), polystyrene (PS), polyvinyl
chloride (PVC) and others such as polyester. The polymers are molded and processed
to form various items such as consumer goods, packages, construction materials,
appliances and industrial goods. It composed of three (3) industries, upstream,
midstream and downstream. Figure 1 shows the linkage/flowchart of the petrochemical
industry.

5
Figure 1. Linkage of the Industry

Tubes, pipes and

hoses
Polyethylene

Floor coverings
Ethylene Polyvinyl
plates, sheets, film,
Chloride
foil and strip

Naphtha Articles of
Polystyrene conveyance/
packaging of goods;
closures

Cracking Propylene Polypropylene

Articles of plastics

6
IV. Major Industry Mid-Stream Players
Table 6. Major Industry Players
Project Cost Start of Annual Status of
Company Products Investors (Php million) Technology Commercial Capacity Operation
Operation (MT)
Petrochemicals Homo- Chemphil
Corp. af Asia polymer PP PO Holdings Ceased
Pacific PNOC/PPDC Operations in
BASF 180 BASF May 1, 1998 160,000 December
Sumitomo ISO 9002 2003
Itochu
JG Summit LLDPE,
Ptrochemical HDPE,
Corp. (JGSPC) Homo- JG Summit Union
polymer and Holdings 350 Carbide
Random Marubeni August 3, 180,000 Operating
Copolymer ISO 902 1998
PP ISO14001
Philippine
Resins Tosoh Tosoh January 9, 90,000 Operating
Industries Inc. PVC 60 ISO 9002 1999
(PRRI) Mitsubishi
D&L Industries/ BC 1985 (under
Chemrez, Inc. PS D&L Industries 15 Chemicals D&L
Industries)
ISO 9002 1994-2001 30,000 Operating
(2001 major
version) expansion
Bataan Bataan PE Ceased
Polyethylene LLDPE, Holding Corp. British Operations in
Corporation HDPE BP Chemical 330 Petroleum February 1, 275,000 July 2001
(BPC) Petronas 2001
Sumitomo ISO 9002

7
Total Production Capacity

Table 7 shows the total production capacity of petrochemical products of each of

the company manufacturing specific product.

Table 7. Total Production Capacity

CAPACITY
PRODUCT NAME OF COMPANY (1,000 MTPY)
PP Petrochemicals Corp. of Asia-Pacific* 225
JG Summit Petrochemical Corporation 180
PE JG Summit Petrochemical Corporation 175
Bataan Polyethylene Corp.** 275
PVC Phil. Resins Industries, Inc. 70
PS D & L Industries, Inc. 18
Phil. Petrochemical Products, Inc. (PPPI) 14
Alkylbenzene LMG Chemicals Corporation 25
Phthalic Anhydride RI Chemical Corporation (formerly 14
Resins, Inc.)
Formaldehyde Borden International Phils., Inc. 28
RI Chemical Corporation (formerly 40
Resins, Inc.)
Emulsion Polymers Borden International Phils., Inc.
D & L Industries, Inc.
Kemwerke, Inc. 25
Pacific Products, Inc.
Polymer Chemicals
Polyester D&L
(unsaturated) RI Chemical Corporation
PPPI 10
Kemwerke
Pacific Products
Polyamide Pacific Products 1
Nylon 6 Fibers Fibertex 14

*ceased operations in December 2003

** ceased operations in July 2001

y JG Summit Petrochemical Corporation produces PP and PE.

y Philippine Resins Industries Inc. is the only manufacturer of PVC.
y Philippine Petrochemical Products Inc. and D & L Industries Inc. are the
companies that manufacture PS

8
 Trade Statistics
Exports and Imports in F.O.B. US$’000 (ASEAN and World)

Imports Exports
Product
1999 2000 2001 2002 1999 2000 2001 2002
ASEAN 46,712 59,460 40,118 53,235 3,053 2,937 121 713
PE
WORLD 121,895 146,952 107,800 121,647 4,158 5,001 2,085 2,895
ASEAN 18,240 29,269 31,933 34,495 3,310 987 353 882
PP
WORLD 60,519 80,206 79,121 80,447 10,973 65 3,768 3,432
ASEAN 8,106 10,119 8,586 8,638 265 1,018 238 766
PS
WORLD 33,990 44,396 37,262 37,023 1,126 2,578 2,179 2,808
ASEAN 2,940 3,567 3,116 3,531 0.6 402 874 703
PVC
WORLD 18,029 16,385 13,083 14,914 3,574 10,411 8,649 10,277

2003 Export and Imports (US$’000)

Imports Exports
PE ASEAN 69,778 423
WORLD 129,154 737
PP ASEAN 27,375 878
WORLD 62,471 3,409
PS ASEAN 5,265 450
WORLD 22,618 1,350
PVC ASEAN 1,391 -
WORLD 5,.919 3,519

Source: Foreign Trade Statistics of the Philippines and BETP)

VII. Participating Groups

y Petrochemical Corporation of Asia-Pacific

y Philippine Resins Industries, Inc.
y JG Summit Petrochemical Corporation
y D & L Industries Inc.
y Philippne Petrochemical Products, Inc.
y Bataan Polyethylene Corporation
y Borden International Philippine Inc.
y RI Chemical Corporation

VIII. Support Groups of Philippine Petrochemical Industry

y Board of Investments (BOI)

y Bureau of Export Trade Promotion (BETP)
y Philippine National Oil Company (PNOC)
y International Trade Statistics (ITS)
y Tariff Commission
y Center for Research and Communication
y National Statistics Office (NSO)