RI’s growing petrochemical market lures foreign players

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Raras Cahyafitri, The Jakarta Post, Jakarta | Business | Wed, December 11 2013, 11:58 AM

Thailand-based PTT Global Chemical Public Company Limited, the chemical flagship of the giant PTT Group, signed an agreement on Tuesday with state-owned PT Pertamina on a joint venture to develop a petrochemical complex in Plaju, South Sumatra.

Under the agreement, Pertamina will hold a 51 percent stake while PTT Global Chemical will have the remaining 49 percent.

“PTT Global Chemical may find another partner with the consent of Pertamina,” Pertamina director Chrisna Damayanto said after the signing of the agreement on Tuesday.

The companies will jointly develop the petrochemical complex on a 450-hectare-site in Plaju that will house, among other facilities, a naphtha cracker with a production capacity of 1 million tons per year, Chrisna said.

Meanwhile, according to Bowon Vongsinudom, PTT Global Chemical president and chief executive officer, the project is estimated to cost between US$4 billion and $5 billion.

He said that the project would help Indonesia reduce its dependence on imported petrochemical products.

“You have resources like naphtha, LPG [liquefied petroleum gas] or even gas to make petrochemical products to replace imports. It’s good to have this project and use it by yourself. You need not import anymore,” Vongsinudom said.

Indonesian’s petrochemical imports amount to around $5 billion per year as domestic downstream industry continues to lack the capacity to meet growing demand.

The Pertamina and PTT Global Chemical JV is aiming to control at least 30 percent of market share in the country after the petrochemical complex starts commercial operations in 2018.

By that time, the country’s petrochemical market value is expected to be worth $30 billion.

“If we are more competitive, we can achieve 100 percent [of the market] in Java,” Chrisna said.

The Thai company is not the only foreign player to enter the petrochemical projects here. Among others South Korean Honam Petrochemical Corporation is reported to be planning a $5 billion petrochemical complex in Cilegon, Banten.

The plant is expected to be completed by 2016.

In anticipation of the growing petrochemical market in the country, a number of foreign investors have begun investing billions of dollars in developing facilities.

Amid increasing competition, Jakarta-listed PT Chandra Asri Petrochemical is also working to expand its naphtha cracker facility in a development project worth $380 million.

The company announced on Monday that it had obtained loans amounting to $265 million from various banks, namely Bangkok Bank PCL Jakarta branch, the Siam Commercial Bank PCL, Indonesia
Eximbank, DBS Bank Ltd., and Deutsche Bank AG Singapore branch.

Chandra Asri is currently 59.35 percent owned by PT Barito Pacific, which is controlled by local tycoon Prajogo Pangestu, 30.12 percent by Thai SCG Chemicals Company Limited and the remaining stock is held by the public.

The company is planning to increase the production capacity of ethylene to 860,000 kilotons per year from the previous 600,000 kilotons.

Fajar Budiyono of the Indonesian Olefin, Aromatic and Plastic Industry Association (INAplas) believes Indonesia is an attractive market for the development of petrochemical projects as the sector is expected to grow by 7 percent next year.

“For naphtha there is still room because our midstream sector is still empty. Meanwhile, our per capita consumption of petrochemical products is still low at 17 kilograms per year, compared to neighboring countries, such as Malaysia, Singapore and Thailand at 30 kilograms,” Fajar said.

Ilustration Picture courtesy of wartaekonomi.co.id

News Source / Read more: http://www.thejakartapost.com/news/2013/12/11/ri-s-growing-petrochemical-market-lures-foreign-players.html

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