The Malaysian government has, for the past two years, been laying a thrust on the development of its nascent petrochemicals industry as a leading driver of future economic growth. Malaysia's oil and natural gas as petrochem feedstock became a major attraction amid rising energy prices, attracting foreign direct investment. Figures from the Malaysian Industrial Development Authority showed total investment in the petroleum products and petrochemicals industry rising steadily to 57.2 bln Malaysian ringgit (US$15.8 bln), at the end of last year from 56.9 bln ringgit at the end of 2007 and 55.5 billion ringgit a year ago. Since the past quarter, the country is faced with shrunken demand for downstream petrochem products and increased competition from Middle Eastern and Asian countries, causing several plant shutdowns and revision of expansion plans. More than usual number of approved projects will not be implemented as per the development authority's senior deputy director for petrochemical and polymer industries.
State oil company Petronas has shut down several units in the states of Terengganu and Pahang since December on deteriorating demand for polyethylene. Several of the 39 petrochemical companies that operate in Malaysia, including Titan Chemicals, ExxonMobil and BASF, are also scaling back run rates.
BASF-Petronas temporarily shuttered 6 out of its 12 plants at the end of last year, although they have since resumed limited production. Titan has sharply cut output from its two naptha cracking units in Johor state, which have an annual production capacity of 660,000 tons of ethylene and 360,000 tons of propylene.