2.

3 SITE FEASIBILITY STUDY

2.3.1

Introduction
Choosing strategic plant location is one of the most crucial decisions needs to be

done. The construction of a chemical plant requires a preliminary feasibility study to be done
in order to make certain that the proposed 30,000 kg/year PET plant is feasible, economically
and environmentally. The location of the plant site takes relatively high precedence and it
mainly depends on the availability of feedstock, cost of production, marketing of the
products, land availability and also the infrastructure. The right location allows maximum
profit with a minimum operating cost and allowance for future expansion.
2.3.2

Selection Criteria
Based on the study done in the selecting strategic plant location, there are several

factors that should be taken into consideration when undertaking the process of selecting a
suitable site. There are two major factors that contribute to the operability and economic
aspects of a site location for a plant, which are the primary factor and specific factor.
Table 1.1 : Contributing Factors to Operability and Economy Aspects
Primary Factors
Specific Factors
1. Raw material supply for industry Availability of low cost labor and
services
2. Reasonable land price
Safety and environmental impacts
3. Source of utilities, such
electricity, water and etc.

4. Climate status
Wind
Rainfall
Temperature
Relative Humidity

as Incentives given by government :

Pioneer Status
Investment Tax Allowance (ITA)
Effluent and waste disposal facilities
Transportation facilities
Local community consideration

2.3.3

Contributing Factors in Site Selection

General Factors
i.

Supply of Raw Material

The supply of raw material is one of the most important factors need to be

considered in plant site selection especially when involving large quantity of supply.
The production of MAN will involve Natural Gas as the raw material.
Proximity to the source of supply can permits considerable reduction in storage
facilities and transports cost. Factors such as purchased price of the raw material,
availability and reliability of supply and purity of raw material should also be
considered.
For the production of MAN, the raw material which is Natural Gas can be
supplied by GAS Malaysia.
ii.

Reasonable land price

Most of the industrial land price depends on the location. It is very important

to choose an economical land price which can reduce the total investment cost.
Besides that, it is important to choose the lowest land price when starting a new plant
to gain the highest economic value.
iii.

Utilities
In petrochemical industries, large quantities of water supply are usually

needed for cooling and general use in a chemical plant. Besides that, petrochemical
plants need power in the form of electricity to run machines and equipments. Thus it
is important to have sufficient power and local water supply in order to ensure the
plant running smoothly.
iv.

Climate
Budget and cost operation can be affected by climatic conditions. A general

analysis of the yearly weather conditions would be an important consideration.

Specific Factors
i.

Availability of low cost labor and services

Plant should be located where sufficient labor supply is available. Skilled

construction workers will usually be brought in from outside local area but there
should be an adequate pool of unskilled workers available locally and workers
suitable for training to operate the plant. Available, inexpensive manpower from the
surrounding area will contribute in reducing the cost of operation.
ii.

Transport facilities
The plant should be located close to at least three forms of major

transportation facilities, which are road network, seaport and airport. These will help
facilitate any import and export activities. Seaport facilities will help in the
exportation and importation of the product and raw materials via tankers while the
availability of airport is convenient for the movement of personnel and essential
equipment supplies.
iii.

Government incentives
Most state governments offer attractive incentives to investors. Some

incentives grant partial or total relief from income tax payment for a specified period,
while indirect tax incentives come in the form of exemptions from import duty, sales
tax and excise duty. This can help reduce initial operating costs.
iv.

Local community consideration

The proposed plant will have to fit in with and acceptable to the local

community. Full consideration must be given to be safe location of the plant so that it
does not impose a significant additional risk to the community. On a new site, a local
community must be able to provide adequate facilities for the plant personnel: school,
banks, housing, and recreational and cultural facilities.
v.

Waste and effluent disposal facilities

Site selected should have efficient and satisfactory disposal system for factory

waste and industrial effluent if it is decided that the waste should be treated off-site.

2.3.4

Summary of site Characteristic in Each Location

Five major location are identified to be considered in the site selection for the construction of
Maleic Anhydride production plant . The locations are :
i)
ii)
iii)
iv)
v)

Kidurong Industrial Area

Kota Kinabalu Industrial Park
Pasir Gudang Industrial Estate
Pengerang Intergrated Petroleum Complex
Kerteh Petrochemical Complex

the characteristics of each location is listed based on the primary and specific factors which
had been justified before. Table _ in Appandix _ shows the summary of the site
characteristics for each location.
2.3.5

Site Evaluation
The evaluation of each location is done based on weightage system. Table 2.2 below

shows the range of weighted marks for each identified criteria. The site location is evaluated
based on the guidelines.
Factors
Supply of raw material

7-10 Marks
4-6 Marks
Able to obtain large
Source of raw materials
supply locally thus
from neighbouring
saving on import cost
states or countries
Having long pipeline
with the distance not
networks for
exceeding 80km.
transportation of raw
Uses a pipeline system as
material
well.

Price and Area of Land

Local Government

Incentives

Transportation

0-3 Marks
Unable to obtain raw
material from close
sources with the
distance exceeding
80 km
Forced to import
from foreign
countries
Uses a pipeline
system as well.
Land area below 40
hectares
Price of land more
than RM 30 psm

Land area exceeding

60 hectares
Price of land below
RM 20 psm

Incentives from the

local organization of
country development
Incentives from
special company
Complete network
and well maintained
highways,
expressways and

Incentives from the

local organization of
country development

No incentives from
the local organization
of country
development

Good federal road

and highway system
Limited railway
system access

Average road system

No highways or
expressway system in
close proximity

Land area below 60

hectares
Price of land more
than RM 20 psm

roads
International Airport
facilities access to the
main location around
the world
Location near to
international port
which import and
export activities
Reliable railway lines
to remote areas not
accessible by roads

More distant from the

ports
Airport facilities
which may not have
international flight
facilities- only
providing domestic
flight

No railway system
Very distant from the
ports or harbours
Distant form the
nearest airport more
than 100km away

Table 2.3 shows the weight matrix for each site location.

Criteria

Kidurong
Industrial
Site

Kota
Kinabalu
Industrial
Park

Pasir Gudang
Industrial
Estate

Pengerang
Intergrated
Petroleum
Complex

Kerteh
Integrated
Petrochemical
Complex

Supply of Raw
Material

10

10

Price
Area of Land

8
10

1
7

9
4

10
9

4
4

Local Government
Incentives

Transportation
Workers Supply
Utilities, water and
electricity
Type of industrial
and its location

9
10

8
7

6
10

6
9

10
98

10

10

10

Waste water disposal

10

10

Total

84

58

70

86

73

Percent (%)

84

58

70

86

73

Based on the weight matrix, the selected location for MAN plant construction is Pengerang
Integrated Petroleum Complex (PIPC). The location is justified to be the most suitable
and strategic compared to the others based on all the criteria.
Some of the attractive information of the location are as followed :

Pengerang Integrated Petroleum Complex is located 42km from Johor Bharu. It is one
of the identified Entry Point Projects for the Iskandars Malaysia Oil and Gas

activities. The proposed site will be located on a 6,424 acres of land in West
Pengerang, District of KotaTinggi, south-east of Johor.

It consist of a crude oil refinery with processing capacity of 300,000 barrels per day.
Malaysia's daily refining capacity will grow from 635,300 barrels now to 935,300

barrels.
Include related infrastructure such as pipeline, tankage and other logistics and

warehousing facilities.
Potentially include a LNG receiving and re-gasification terminal which is the main
supply of raw material for Malefic Anhydride production plant apart from cater the
energy needs of the RAPID complex and contribute towards the efforts of

diversifying the sources of gas and energy supply.

The land price in PIPC is far more cheaper compared to the other locations which is
around RM64.58-RM86.11 . The land availability is also far more larger than the
other four locations. This can give the team a more option in selecting available land.

Selection Criteria

Kidurong Industrial Area

Kota Kinabalu Industrial

Park

Pasir Gudang Industrial

Estate

Pengerang Intergr
Petroleum Comp

Location

20 km from Bintulu Town

25 km from KK

36km from Johor Bharu

42km from Johor B

Type of industry

Light & Medium

Any compatible

Light, Medium & Heavy

Petrochemical and re

Preferred

Food
Timber-based
Plantation-based

Area available

Petrochemical and gas

Timber-based
Plantation and Agro
Energy Intensive
97.3 hectare

7.05 acres

430 acres

Land price(per m2)

RM 77.42

RM 129.17

RM 86.08 236.72

Raw material
Supplier
Power Supply

Water Supply

Optimal, Kerteh
Amoco Chemicals, Gebeng
SESCOS Combined Cycle
Power Plant (132MW)

KKIP Power Sdn Bhd

(300MW)

Sultan Iskandar Power Station

(644 MW)

Bakun Hydroelectricity Power

Project (2400MW)

Powertron Resources S/B

(120MW)

IPP YTL Power Generation Sdn.

Bhd.

Sarawak Power Generation

Plant (220MW)

Sabah Electricity Sdb Bhd

(293MW)

Bintulu Water Supply

Treatment Plant

Diversified Water Resources

S/B

Loji Air Sungai Layang

Syarikat Air Johor

22, 500 acres

RM64.58-RM86.

PETRONAS Rapid (
Regasification Pla

Sultan Iskandar Power

(TNB)

Pasir Gudang Power S

(YTL Power Interna
Bhd)
PETRONAS Power
(future planning

SAJ Holding Sdn B

Future investment on
supply project

Loji Air Sungai Buluh

Port Facilities

Bintulu Deepwater Port

Sepanggar Bay Port

Pasir Gudang Port

Airport

Bintulu Airport

Kota Kinabalu International

Airport

Senai International Airport,

Johor and Changi International
Airport, Singapore

Railway facilities

Roadways

Pan-Borneo Highway

KK-Sulaman Road

Singapore and North Peninsular

Malaysia
Main road to Singapore

Pengerang Petrole
Terminal
Tanjung Langsat Petr
Terminal
Senai International A
Johor and Chang
International Airpo
Singapore
KTM Singapore-N
peninsular route
Second Link Expres

KK West Coast Parkway

PLUS Highway

Senai-Desaru Expres

Federal Route 500

Incentives

North-South Highw

Pioneer Status
5-years 70% tax exemption on
statutory income

Pioneer Status
5-years corporate tax on 15%
of statutory income

Investment Tax Allowance

Allowance of 100% in respect
of qualifying capital
expenditure incurred

Investment Tax Allowance

Allowance of 85% in respect of
qualifying capital expenditure
incurred

Incentives for research

development

100% exemption on dir

fees paid to non-Malay
director;

Reinvestment Allowance
Allowance of 100% in respect
of qualifying capital
expenditure incurred

Infrastructure Allowance
100% infrastructure allowance
on qualifying expenditures

Exemption from import duty on

direct raw materials/components

50% exemption on g
employment income f
Malaysian professi
traders;

Incentives for High Tech

Industries

Land Incentives by State

Government

tax exemption of stamp

on documentatio

Rebate on industrial land

Free Infrastructures

Pioneer Status and Investment

Tax Allowance and
Reinvestment Allowance.
Incentives for high tech

Incentive for exports

a flat corporate tax rate

of chargeable incom

tax exemption on div