China's Hengyi plans huge investment in Brunei

China's largest chemical-fiber producer Zhejiang Hengyi has ambitious plans for its petrochemical plant in Brunei, as it aims to ensure production material supplies and broaden its market reach through the project.

From the outset, the project has been a milestone for both parties. It is the largest overseas investment by a private-owned Chinese company, as well as the first complex of such scale in Brunei producing aromatics.

Exploring Overseas Opportunities

The Zhejiang-based company started negotiations with the Brunei government on building an integrated petrochemical project in the country in 2010. The move aimed to reduce Hengyi's reliance on imports of petrochemical raw materials, mainly paraxylene. Back then, 60 percent of its consumption of paraxylene came from imports.

High dependence on imported raw materials not only made it more difficult to secure supplies but also escalate prices. Given that the textile industry was under-performing, chemical-fiber manufacturers like Hengyi were struggling to achieve target.

However, Hengyi's bold decision to explore opportunities abroad in Oil and Gas rich country Brunei, may well be the lifeline needed to bring Hengyi up to the next level.

In July 2011, Hengyi obtained approval from the Brunei government to invest an integrated refinery and aromatics cracker plant at Puala Muara Besar (PMB).

The first phase of the PMB project is estimated to cost US$4 billion with potentially a further increase to USD6 billion in the second phase subject to the Brunei Government's approval.

Oil products for the PMB project will be sourced both in Brunei and other countries. Petrochemical products will mainly be shipped back to China for Hengyi's material supplies.

"The refinery and aromatics cracker plant at PMB will meet 30 percent of Zhejiang Hengyi's demand for petrochemical products" said Mr Qiu back in 2011. "The consistent and uninterrupted supply of production materials can affect our international competitiveness," he said.

The PMB project is expected to produce approximately 175,000 barrels a day and is targeted to be completed by 2017, according to Hengyi.