INDONESIA: New venture to boost Pertamina's petrochemical business

Pertamina's business and marketing director, Hanung Budya Yuktyanta, said that the firm would start focusing on marketing activities both in the domestic and regional markets following the formation of the joint venture, which will construct a US$5 billion petrochemical facility.

"Before the facility is fully developed in 2017 as planned, Pertamina wants to be able to meet the domestic demand for petrochemical products through the new joint venture in cooperation with our global partner,” he said.

Therefore, he said, Pertamina's goal was to aggressively increase sales of petrochemical products by around 500,000 tons by the end of 2013 through the planned business partnership.Last year, Pertamina targeted sales of 1.7 million tons of petrochemical products, higher than the firm's actual sales in 2011 of 1.27 million tons.

In mid-December 2012, Pertamina signed agreements with three foreign companies: South
Korea-based SK Group's subsidiary SK Global Chemical, Japan's Mitsubishi and Thailand's oil and gas company PTT PCL's subsidiary PTT Global Chemical in relation to the project.

The Jakarta-based energy company aims to choose one of the three competing firms in April this year to become its partner to set up the integrated petrochemical plant, which is expected to begin operations in 2017 with a capacity to produce around 1 million tons of petrochemical products annually.

Pertamina will have a shareholding of at least 51 percent in the joint venture while the remaining 49 percent will be held by its partner.

The plant, the location of which is yet to be decided, is projected to have an annual production capacity of around 250,000 tons of ethylene along with 350,000 tons of polypropylene.

The plant will also produce 400,000 tons and 200,000 tons respectively of polyethylene and polyvinyl chloride.

Indonesia's petrochemical-related industries are deeply reliant on imports due to the inability of domestic production to meet an annual demand of around $30 billion as evidenced by Pertamina's current share of only about 10 percent of the petrochemical market.

Pertamina aims to corner 30 percent of the market share in the industry in 2017 with the
completion of the planned petrochemical plant, and 70 percent of the market in 2025.

This is in line with its vision to become a "world-class energy company” and "Asia's energy champion” by that time.

In addition to the $5 billion petrochemical facility, Pertamina also aims to set up a polypropylene factory with a capacity of 250,000 tons annually near its oil refinery in Balongan, West Java through cooperation with the publicly listed PT Chandra Astri Petrochemical.

Source: Daily "The Jakarta Post", Jakarta; 4 Jan 2012

(Syed Rashid Ali, Karachi, Pakistan)