Construction of the plant, the first of its kind in the ASEAN region, is expected to commence in the second quarter of this year.
"This investment further strengthens BASF's offerings in various downstream markets across a broad range of applications," he said.
The plant, with a total annual capacity of 30,000 metric tonnes of 2-EHAcid, is expected to start production in the fourth quarter of 2016, and will benefit from backward integration into the site, allowing high delivery reliability and maximising efficient use of energy and feedstock.
"With this project, Petronas and BASF are fully utilising our combined strengths in the areas of skilled resources, technology and overall molecular integration thus further optimising the value chains," PCG's President & Chief Executive Officer Datuk Sazali Hamzah said.
2-Ethylhexanoic acid is a chemical intermediate used in the production of synthetic lubricants, oil additives, automotive coolants, metal salts for paint dryers, plasticisers, stabilisers, catalysts and other applications in various industries.
BASF operates a 2-EHAacid production plant at its Verbund site in Ludwigshafen, Germany.
In addition to the proposed plant, BASF Petronas Chemicals Sdn Bhd is also building an Integrated Aroma Ingredients Complex at its Kuantan site for the manufacture of citronellol, L-menthol as well as citral and its precursors which are widely used in the flavour and fragrance industry.
Ground breaking for the US$500 million integrated aroma ingredients complex was done in April 2014 and the first plant is scheduled to come on-stream in 2016.
BASF and PCG founded their joint venture BASF Petronas Chemicals Sdn Bhd in 1997.
BASF Petronas Chemicals currently operates an integrated complex at the Gebeng Industrial Zone, Pahang.