Indonesia's Government Has Redirected State-Owned Oil Refiner Pertamina to Build Three Refineries Each Costing US$5bn By 2020

Indonesia's strong long-term domestic demand growth, ample raw material
resources and proximity to Chinese and ASEAN markets will drive investment in
the petrochemicals sector in coming years, according to BMI's latest Indonesia
Petrochemicals Report. 

In response to the lingering problem of a lack of local petrochemicals
capacities, the government has redirected state-owned oil refiner Pertamina to
build three refineries each costing US$5bn by 2020. This would reduce the
Indonesian petrochemicals industry's reliance on imported naphtha, which has
hampered the expansion of the sector. In February 2010, Chandra Asri, Dow
Chemicals, Pertamina, Polytama and Try Polyta announced plans to invest
US$1.12bn in 2010. According to reports, the projects planned by the five
Indonesian petrochemical companies will reduce the deficit in the supplies of
petrochemical products. However, Indonesian petrochemicals producers are too
small to stump up the necessary investment to take advantage of the additional
feedstock and would need foreign partners. This looks an increasing likelihood. 

Indonesia is becoming increasingly attractive as an investment destination for
petrochemicals producers, particularly from Taiwan. The country is unable to
meet its needs in polymer resins, but at the same time Taiwanese majors are
facing constraints in building large refinery and cracker investments in China
and are seeking locations with a high availability of raw materials. Taiwan's
Chinese Petroleum Corp (CPC) is planning a US$2.8bn petrochemical complex at
Kalimantan which will involve the relocation of a refinery with
100,000-200,000b/d of refined product and a naphtha cracker with 730,000tpa of
ethylene production capacity as well as downstream PE, styrene monomer and
acrylonitrile facilities. However, it is unclear when the project would come
onstream. 

Indonesia's current sole producer of ethylene, Chandra Asri, is working with
Pertamina on a refinery project. Chandra Asri is planning two projects,
including the country's first butadiene unit with an investment of US$100mn and
a US$70mn BTX extraction plant. Dow Chemicals plans to spend US$500mn on a
petrochemical project, while PT Pertamina is to invest US$200mn in a PE project
in Balongan, West Java. Pertamina is also building a new 250,000tpa PP plant at
its Balongan complex. Meanwhile, Polytama is looking at the expanding its PP
capacity from 280,000tpa to 440,000tpa. The project is expected to be completed
by 2011 and will cost up to US$300mn. The expansion of Tripolyta's PP plant in
Merak to 480,000tpa in 2011 will provide an extra 120,000tpa of PP capacity in
Indonesia. With domestic PP demand due to reach 1.1mn tpa in 2011, the expansion
of capacity at both Merak and Balongan will not be enough to reduce Indonesia's
dependency on imported PP. BMI cautions that greater PP self-sufficiency cannot
be achieved if the country does not sustain an adequate local supply of
propylene, which as mentioned has been problematic. Source: Reuters