INDONESIA: Petrochemicals remain Barito priority despite continued losses

Barito Pacific director Henky Susanto said Wednesday (21 May 2014) that the firm's revenue was estimated to rise by about 8 % to hit USD 2.7 billion this year, compared to USD 2.52 billion last year, 96 % of which would be contributed by Chandra Asri.

"To achieve this year's target, we plan to disburse USD 135 million in capital expenditure, of which about USD 120 million will be used to finance our petrochemical business,” he told reporters on Wednesday.

Barito Pacific, which is owned by local tycoon Prajogo Pangestu, is currently working on two petrochemical investment projects, worth USD 815 million, which aim to be completed by 2017.

The first is via Chandra Asri, which has reached a deal with French tire maker Compagnie Financière du Groupe Michelin for a USD 435 million synthetic rubber plant.

The two entities agreed last year to establish a joint venture that would be 55 % owned by Michelin and 45 % by Chandra Asri's wholly owned subsidiary, PT Petrokimia Butadiene Indonesia (PBI).

Construction of the synthetic rubber plant is expected to be launched in early 2015 and completed within two years.

Meanwhile, the second project also involves the chemical subsidiary expanding the capacity of its naphtha cracker plant in Cilegon, Banten, which is expected to be finished next year. The overhaul, which will include the purchase of new machinery, will cost approximately USD 380 million.

The expansion plans will enable the company to increase its production capacity of ethylene, propylene, mixed C4 and pygas by more than half for each.

"We have kept on recording losses because we still rely heavily on our petrochemical industry. The investments that we have disbursed now are expected to expand Chandra Asri's portfolio and further enhance our competitiveness,” Henky said.

Chandra Asri had been suffering from the volatility in the petrochemical industry, the company said in its annual report, as raw material prices had fluctuated along with oil prices. The average price for naphtha in 2013 was USD 955 per metric ton, while benzene averaged $1,298 per metric ton.

Source: Daily "The Jakarta Post", Jakarta; 22 May 2014
(Syed Rashid Ali, Karachi, Pakistan)