The government says it will develop two new upstream petrochemical industrial centers to help shift Indonesia’s status from net importer to net exporter of petrochemical products by 2016.
The industrial centers would be located in Muara Enim, South Sumatra and Bintuni Bay, West Papua, the Industry Ministry’s director general for manufacturing-based industry Panggah Susanto, said in Jakarta on Friday.
The first center would utilize natural gas and coal to produce methanol and ammonia, while the second one would use natural gas to generate methanol, polypropylene, polyethylene and ammonia, he added.
Apart from building the new centers, the government will endorse the development of oil refineries to provide raw materials for three existing upstream petrochemical centers in Cilegon, Banten; Bontang, East Kalimantan; and Tuban, East Java. At present, the Cilegon petrochemical center imports naphtha, while the Tuban center imports condensate.
“We need at least three refineries, each having a processing capacity of 300,000 barrels of oil per day. The fuel, naphtha and propylene can go to existing olefin plants, while the condensate will supply aromatic plants, and this will strengthen the structure of our petrochemical industry,” Panggah said, adding that a refinery would cost from US$4 billion to $5 billion in investment.
Fuel and naphtha are raw materials to produce propylene, a key material in the plastics industry which makes myriad plastic-based household products, and condensate, a main ingredient in the textile industry, which manufactures synthetic fibers.
Panggah said that in addition to these efforts, Indonesia would also need to build naphtha crackers with a capacity to produce 1 million tons of ethylene — the substance to make polyethylene, propylene, and polypropylene used in the plastics industry with an investment of around $1 billion, and new aromatic plants to produce various chemicals, such as benzene and toluene — the substance to produce paraxylene used in the textile industry.
Indonesia’s petrochemical industry has developed since the 1980s, but the upstream industry entered a plateau period in the last 10 years, causing the intermediary and downstream industry to source a huge amount of raw materials from overseas.
Last year, imports of petrochemicals totaled $6 billion and the figure was estimated to rise by around 10 percent to $6.5 billion this year along with surging demand from the plastics and textile industries, according to the Industry Ministry.
To attract new and sizeable investment in the upstream side, the government has provided various incentives, such as tax holidays and tax allowances. South Korea’s giant Honam Petrochemical Corp., Asia’s second-biggest petrochemical maker, for example, has expressed its interest in setting up a petrochemical complex with an investment of $5 billion in Cilegon, Banten.
Ali Mundakir, the president for corporate communications at state-owned oil and gas company PT Pertamina, said that the company would invest approximately $5 billion to build a naphtha cracker jointly with a foreign partner.