A WIDE BASE

Malaysia 2017 | ENERGY | INTERVIEW

TBY talks to Datuk Sazali Hamzah, Managing Director & CEO of PETRONAS Chemicals Group (PCG), on the group's major achievements in recent years, prospects for expansion, and pursuing further opportunities.

Datuk Sazali Hamzah
BIOGRAPHY
Prior to joining PCG, Datuk Sazali Hamzah was the Managing Director of the PETRONAS Refinery in Malacca. He has more than 24 years of experience in the oil and gas sector and joined PETRONAS in 1990 as a process technologist. In 2003, he participated in a PETRONAS corporate strategic study, after which he led a change program that enhanced plant performance and operational excellence. He sits on the board of three PETRONAS subsidiaries. He holds a bachelor of chemical engineering from Lamar University in Texas and attended the Advanced Management Program at Wharton.

What have been some of the key achievements of PCG in recent years?

In 3Q2016, we recorded a higher EBITDA margin of 41% compared to 39.5% in the same quarter in 2015 and 37.6% in the previous quarter. Operationally, PCG managed to deliver YtD a 96% plant utilization rate, up from the 85.1% achieved in the same period of 2015, as a result of improved plant reliability and higher feedstock supply. In addition, PCG recorded its highest overall sales performance, which has helped us to cushion the impact of low petrochemical product spreads. PCG has set clear goals for the years to come. While the journey ahead will remain challenging, we have successfully proven our resilience over the past year. In order to successfully navigate the challenges in the industry, we continue to pursue our two-pronged strategy of strengthening our basic petrochemicals portfolio while selectively diversifying into derivatives, specialty chemicals, and solutions.

Around 37% of your revenue is sourced in Malaysia, with other markets—especially Southeast Asia—representing the other part. How do you envision further international expansion?

We optimize our portfolio mix with a focus on domestic and key markets in Asia Pacific, where we have a geographical advantage. We have incorporated and operationalized two overseas marketing subsidiaries in Thailand and China, which are our key export markets, accounting for 16% and 9% of our revenue, respectively. The establishment of these overseas subsidiaries will enhance PCG's presence in these key markets while also developing customer intimacy through close customer relationship management and direct customer interaction. In addition, we have incorporated a new marketing subsidiary in Jakarta, which should be fully operational by early 2017. Indonesia is another key export market to PCG and we intend to further expand our market reach in the country. We also have representative offices in Vietnam and the Philippines and are keen to develop strategic collaborations with customers in other markets in Southeast Asia and Asia Pacific, including Australia and New Zealand.

As a company predominantly active downstream, how has the current low price environment for commodities affected your plans?

PCG is selective with our projects, ensuring they are executed in a cost-efficient manner. The current low oil price environment serves as a sharp reminder and an excellent opportunity for us to be much more prudent in looking at ways and means to reduce our cost of operations. Hence, PCG's challenge and our greatest priority is cost optimization and doing more with less. At the same time, it is also about planning and prioritizing projects. Sanctioned projects will be carried on as planned and funds will be allocated accordingly. We believe it is not about having “nice to have” projects in hand but rather looking at growth projects that are instrumental in making PCG a leading petrochemical player in Asia Pacific.

What are your ambitions and key objectives for the year ahead?

Our strategy is to strengthen our basic petrochemicals slate while selectively diversifying into derivatives, specialty chemicals, and solutions. To strengthen our basic petrochemicals slate, we need to be cost effective, while maintaining our reliability and world-class standards. Currently, our nameplate capacity is 10.8 million tons per annum (mtpa) of basic petrochemicals products, and by 2017, we will increase our production capacity by another 2 million to 12.8mtpa. With this, we will further strengthen our basic petrochemicals, mainly in ammonia and urea, and add some specialty chemicals to our portfolios. Despite the current low market environment for ammonia and urea, we anticipate that urea consumption in the long run will continue to grow in relation to the increasing population, especially in Southeast Asia as well as Asia Pacific. By 2020, our petrochemicals projects, under the PIC project, will further add about 3.5 million to reach 16mtpa, providing a solid foundation to move toward derivatives and specialty chemicals. Beyond 2020, we will exert greater effort to assess our opportunities in downstream derivatives and specialty chemicals at PIC, Kertih, Kuantan, and East Malaysia.