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Indonesia Petrochemicals Report Q1 2011
Business Monitor International, Dec 2010, Pages: 58
The Indonesia Petrochemicals report provides industry professionals and strategists, corporate analysts, oil and gas associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Indonesia Petrochemicals industry.
Consolidation within the petrochemicals industry should help with integration and lay the basis for investment in capacity growth over the long term, according to the latest Indonesia Petrochemicals Report.
In September 2010, regulatory authorities approved the merger of Tri Polyta Indonesia and Chandra Asri, which will adopt the name Chandra Asri Petrochemicalas. The merger was expected to be formally completed on January 1 2011, creating Indonesia’s largest petrochemical company. Tri Polyta produces 360,000tpa PP polypropylene and Chandra Asri produces 600,000tpa propylene as well as ethylene and PE, so the merger will integrate upstream and downstream facilities.
PP production capacity is due to expand in 2011, requiring an increase in propylene supplies upstream. Pertamina is constructing a new 250,000tpa PP plant at its Balongan complex and Polytama is looking at the expanding its PP capacity from 280,000tpa to 440,000tpa in 2011. 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. However, BMI also believes that not enough progress was being made to ensure sufficient feedstock supply to the segment. Meanwhile, Indonesia is attracting interest from Asian investors seeking new sources of petrochemicals to feed ASEAN plastics converters. In October 2010, South Korea’s Honam Petrochemical Corporation announced it was studying plans to build a 450,000tpa ethylene plant in Indonesia, at an estimated cost of US$500mn. Honam was expected to visit Indonesia to conduct due diligence studies in Q410. Taiwan’s state-run CPC Corporation announced in September 2010 that it was considering relocation of its 450,000tpa No 5 naphtha cracker, one of its largest naphtha crackers, to Indonesia. Together, the plants will have refining capacity of 100,000-200,000b/d and ethylene capacity of 730,000tpa as well as downstream PE, styrene monomer and acrylonitrile facilities.
These will be joined by associated downstream plants, which CPC hopes will provide an outlet for ethylene and other petrochemical materials turned out by its facilities. Part of CPC’s plan is to operate it with a private firm. A study is being conducted to study the possibility of relocation. If the cracker is moved, it would be disassembled in Taiwan and rebuilt at its new site. The main reason behind the relocation is CPC’s struggle against a trend of weak petrochemical margins. By relocating plants in Taiwan that are due to be decommissioned in 2012, the company has saved 30-40% in construction costs compared with building a new plant with similar capacities. The naphtha cracker has up to 20 years more life.
In the Asia Petrochemicals Business Environment Ratings matrix, Indonesia is 10th out of 12 countries, with 46.4 points, up 0.9 points since 2010 due to an improvement in market risks following the liberalisation of trade with China and ASEAN and the merger of Chandra Asri with Tri-Polyta. Indonesia lies 2.8 points ahead of the Philippines and 15.4 points behind India. Plans for capacity expansion coupled with improved risk could raise the country’s petrochemicals rating in the future, but BMI thinks it highly unlikely it will close the rank with India.
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