INDONESIA: Petrochemical deal to unite PTT and Pertamina

The agreement serves as a pre-marketing strategy for Pertamina and PTT's joint Indonesian petrochemical business. Under the agreement, PTT will deliver at least 5,000 tons of polyethylene and polypropylene products each month to Pertamina for sale in Indonesia, the Jakarta-based company said in a statement.

Pertamina and PTT already have a joint venture agreement to build a petrochemical facility with an annual production capacity of 1 million tons. The output from the facility will comprise of ethylene and polypropylene as well as polyethylene and polyvinyl chloride. There are no details on the facility itself.

The delivery of petrochemical products will commence when Pertamina and PTT officially establish the joint venture, which is scheduled for this year. Taryono, senior vice president of non-fuel distribution at Pertamina, said the pre-marketing strategy is a sign of Pertamina's commitment to the domestic petrochemical market while also tapping into international opportunities. Construction of the facility is expected to start next year, with production beginning in 2018. Pertamina said it would control at least 51 percent of the joint venture, requiring an investment of up to $5 billion.

Pertamina has said it planned to make petrochemicals a key part of its business as it strives to become a regional leader by 2025. Pertamina holds a 10 percent share of the domestic petrochemical market, which due to low refinery capacity relies on around $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, begins operating.

PTT Global Chemical is a leading player in the petrochemical industry and owns several petrochemical facilities with a combined capacity of 8.45 million tons a year.

Source: Daily "The Jakarta Globe", Jakarta; 4 June 2013(Syed Rashid Ali, Karachi, Pakistan)