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Thailand’s IRPC delays $1.3bn upgrade plans


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August 5, 2008

Thailand’s IRPC delays $1.3bn upgrade plans
Thai petrochemical refiner IRPC decided to delay its plans for a $1.3 billion upgrade due to concerns about rising financial costs as a result of the US subprime crisis, said Reuters on Monday.

The delay, apparently coming at a time when refinery profit margins are coming under increasing pressure, is seemingly to be one of the first indications that the global credit turmoil is beginning to stymie energy companies in their effort to expand capacity after years of soaring prices.

“We have to review the budget. Now global markets are facing the same problem about financing, which is the result of the subprime crisis,” Chief Executive Piti Yimprasert was quoted by Reuters as saying.

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But IRPC, 35 percent-owned by energy firm PTT PCL, remains on track to invest $1.4 billion during 2007-2011 to raise its refining capacity from a nameplate 215,000 barrels per day to 260,0000 bpd by 2011, Piti said.

The firm had initially planned to invest another estimated $1 billion to refine residue such as asphalt into high value products to maximise the use of its feedstock, Piti said. The cost of the project had risen since it was first announced.

IRPC is not the first refiner in Asia to put a hold on expansion plans amid aggressive capacity growth in China, India and the Middle East, which some analyst say could bring a quick end to several years of unprecedented industry profits.

But it is the first to cite the year-old credit crunch as a reason for treading more carefully, although still cash-rich oil majors and producer nations may have less reason to be concerned.

IRPC, formerly Thai Petrochemical Industry (TPI), has focused on improving efficiency and cost cuts since it completed a $2.7 billion debt restructuring in 2006.
TPI was Thailand’s largest corporate debt defaulter after collapsing under a mountain of foreign debt during the 1997/1998 Asian economic crisis.

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