INDONESIA: Pertamina and Chandra Asri scrap joint venture deal

In December, Pertamina and Chandra Asri signed a memorandum of understanding to perform a feasibility study for building a petrochemical facility. The agreement was predicated on the establishment of a joint venture.

"After conducting joint studies, Pertamina and Chandra Asri Petrochemical agreed to end the memorandum of understanding out of mutual interest for the reason that both parties can not reach an agreement on terms of the planned joint venture,” Ali Mundakir, Pertamina's vice president for corporate communication, said on Friday (28 June 2013), refusing to disclose further details.

Pertamina and Chandra Asri initially planned to build a petrochemcial plant to produce 250,000 tons of polypropylene a year. The cost of investment for the deal was estimated at USD 200 million.

The latest development comes just weeks after Pertamina announced a petrochemical business agreement with Thailand's PTT Global Chemical and Chandra Asri signed a $435 million joint-venture agreement with Paris-based Michelin to produce synthetic rubbers.

Early this month, Pertamina signed an agreement to purchase petrochemical products from PTT Global Chemical, as part of the pre-marketing strategy of the companies' joint Indonesian petrochemical business.

Pertamina and PTT Global Chemical have already entered a joint venture agreement to build a petrochemical facility with an annual production capacity of 1 million tons and estimated cost of $5 billion. The facility will produce ethylene and polypropylene, as well as polyethylene and polyvinyl chloride. Construction of the facility is expected to start next year, with production beginning in 2018.

Pertamina has said it plans to make petrochemicals a key part of its business and become a regional leader by 2025. The state-owned company holds a 10 percent share of the domestic petrochemical market, which, due to low refinery capacity, relies on around USD 5 billion a year in imports.

Pertamina expects to hold 30 percent of the market when the facility, expected to be built near one of its existing refineries, commences operation.
(Syed Rashid Ali, Karachi, Pakistan)
Source: Daily "The Jakarta Globe", Jakarta; 28 June 2013