Jakarta. Indonesia is set to see at least $7 billion in new investment in the petrochemical sector in the next three years as the domestic industry tries to keep pace with rising demand, according to an industry association.
Amir Sambodo, the director for Indonesian Olefin, Aromatic and Plastic Industry Association, said the investment will be made to expand domestic production capacity, which in turn could curb imports.
“We imported around $8 billion worth of petrochemical products last year,” said Amir.
Suhat Miyarso, the deputy director of the association, said that such an investment would translate to 30-50 percent growth in the industry. “It is expected that by 2020 we can reduce our petrochemical imports to zero,” he added.
Indonesia produced 1.75 million tons of petrochemical products last year, while consumption was 3.5 million tons, with the difference filled by exports, according to data from the association.
Meanwhile, government data show that imports of chemical products including fuel cost $15.57 billion in 2012 and $10.58 billion in the first eight months last year.
Leading products of the petrochemical industry include Polyvinyl Chloride and synthetic rubber.
Among the major expansion plans are Chandra Asri, which has earmarked $965 million to invest by 2015, and state-owned energy company, Pertamina, which has a joint venture agreement with Thailand’s PTT Global Chemical to build a $5 billion petrochemical facility in Indonesia.
Muhammad Khayam, director for basic chemicals at the Industry Ministry, said the government considers the petrochemical industry to be one of three sectors in which value-added programs should be put in place.
“We consider the petrochemical industry to be crucial to the backbone of our economy,” he added. “Just as we want to add value to our mineral resources and our agricultural output, we also plan to increase the value of our oil and gas resources.”
By definition, the petrochemical industry utilizes fossil fuel such as oil and natural gas as its feedstock.
The association sees securing supplies of natural gas and condensates as major hurdles for the industry’s development, according to Amir. “We have the resources to make the industry competitive, but most is exported,” Amir said.
The government has banned exports of condensate, which is a hydrocarbon liquid from natural gas extraction, in order to meet domestic demand.
Indonesia is a captive market for the petrochemical industry, said Adhi S. Lukman, chairman of the Indonesian Food and Beverage Association. “Last year, the economic output of food and beverage industry was Rp 700 trillion [$61.6 million], 30 percent of which was spent on packaging.”
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