The corporate credit rating of A+ assigned to Kemaman Bitumen Company Sdn Bhd (KBC) is underpinned by its position as the only dedicated bitumen manufacturer in Malaysia once operational; a ten-year off-take agreement with Tipco Asphalt Public Company Limited (TASCO); capable Engineering, Procurement and Construction (EPC) contractors to minimize construction risks; and the existence of a long-term crude oil supply contract, which will mitigate any disruptions to the supply of raw materials.

Supply of bitumen in Malaysia is predominantly provided by oil refineries in Singapore as the local production volume is too small and insufficient to meet the nation’s need. The total bitumen consumption in Malaysia, driven by the maintenance of existing road networks and construction of new highways, is expected to be above 800,000 mt from 2005 onwards; of which approximately all will be imported.

To fill the void of local bitumen supply, KBC plans to construct a bitumen plant with annual production capacity up to 995,000 metric tonne in Kemaman, Terengganu. KBC is 94% owned by Kemaman Oil Corporation Sdn Bhd, which in turn is a 50%-owned entity by Seloga Holdings Berhad (Seloga), TASCO (40%) and Thai Bitumen Company (TBC) (10%). Seloga is mainly involved in construction activities. TASCO is listed on the Thailand Stock Exchange and has been in the bitumen business over the past two decades. TBC is a wholly-owned subsidiary of TASCO.

For the first two years in operations, KBC may sell up to 80% of its bitumen output to TASCO with a minimum take-up of 50% of the output; and from year three onwards, TASCO has agreed to purchase 50% of the total bitumen production. For 2005, TASCO has projected a total bitumen requirement of close to 1 million mt.

KBC has secured supplies of Boscan crude (one of the heaviest crude in the market) through TBC from Petroleous de Venezuela S.A. (PdVSA), the state-owned oil company in Venezuela. A 3-year supply contract with a renewable option for another 3 years has been executed between TBC and PdVSA. Under the agreement, PdVSA agrees to supply about 60% of the plant’s full-processing capacity. The remaining 40% feedstock requirement will be sourced from the spot market.

KBC has awarded the Engineering, Procurement and Construction (EPC) contract to Jilin Chemical Industrial Company Limited (JCC) and Sumatec E & C Sdn Bhd (Sumatec). JCC is a subsidiary company of China National Petroleum Company (CNPC), China’s largest producer of crude oil and natural gas and Sumatec is an experienced local contractor.