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Business deals

Thailand's PTT finds petrochemical partner for US project

South Korea's Daelim Industrial to help push forward $5.7bn Ohio venture

A natural gas rig in Springfield Township, Pennsylvania. The site lies in the center of a deep repository of natural gas that runs through West Virginia, Ohio, Pennsylvania and New York in the northeastern U.S.   © Reuters

BANGKOK -- Thailand's PTT Global Chemical, the petrochemical arm of state-owned oil and gas company PTT, has found a South Korean partner to help advance its $5.7 billion petrochemical complex project in the U.S. state of Ohio.

Wholly-owned subsidiary PTTGC America signed an agreement on Monday with Daelim Industrial, a South Korean construction and petrochemical company, to conduct a feasibility study by 2019 for the ethane cracker project, to include front-end engineering and design and securement of funding, followed by a final investment decision. Construction is expected to take four years.

The ownership of the joint venture has not been determined yet, but in previous stock exchange filings PTTGC has said it would control a majority stake.

Plans are to build a complex that can produce up to 1.5 million tons a year of ethylene and derivatives, such as polyethylene, using locally sourced shale gas. Production capacity was increased from an annual 1 million tons with the joining of the new partner.

PTTGC has been investing some $100 million on a feasibility study since it selected the Ohio site for a "world-class" petrochemical complex in 2015.

When Thai Prime Minister Prayuth Chan-ocha visited the U.S. last September to meet President Donald Trump, PTTGC executives accompanied him and signed a memorandum of understanding with JobsOhio, an Ohio-based job-promoting group, to commit to social development if the plan is executed.

Chief executive Supattanapong Punmeechaow reportedly said during the U.S. trip that any new promotions or incentives for foreign companies investing in the U.S. would encourage the company to make investments.

"We see this project as adding long-term value in a key market and providing exposure to advantaged feedstock supply," said Abhishek Nigam, an analyst with Nomura, in a report published on Wednesday. "However, given the [heavy capital expenditure] schedule, assuming a final investment decision, we also see balance sheet stress rising."

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