Saudi Aramco and Indonesia's Chandra Asri to Come Together in Refinery Joint Venture

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Researched by Industrial Info Resources (Sugar Land, Texas)--Leading Indonesian petrochemical company PT Chandra Asri (CA) (Jakarta, Indonesia) may form a joint venture agreement with leading crude oil and natural gas producer Saudi Arabian Oil Company (Saudi Aramco) (Dhahran, Saudi Arabia) to build a greenfield refinery in Indonesia.

According to sources, the naphtha manufacturing refinery, which is to be set up at an estimated cost of $1 billion, will provide feeds for downstream production at CA's ethylene and propylene plants. CA has investments of about $2.3 billion earmarked for capacity expansion projects.

Budi Susanto Sadiman, a CA director, informed local media that the company is in talks with several companies that have shown interest in the deal, but everything is still in the drawing-board stage. He also stressed that CA would need naphtha to provide a guaranteed supply of feeds for downstream production units, adding that at the moment, crude oil needed for the plant would have to be imported since Indonesian crude oil supplies will not be sufficient for the naphtha plant.

According to sources, Saudi Aramco is the only company "serious" about guaranteeing a supply of crude oil to feed the naphtha factory being planned by what is reported to be the country's largest petrochemical company.

CA produces 525,000 tons per year of ethylene, 250,000 tons per year of polyethylene, and 240,000 tonnes per year of propylene. Susanto said that CA has imported 600,000 tons per year of naphtha so far, for further processing into ethylene.

Meanwhile, the company is looking into a plan to construct a greenfield naphtha cracker to feed its petrochemical unit in the coastal industrial city of Cilegon, which is in the northern Banten province of Indonesia. The refinery, which will be established at an estimated $7 billion, will require 300,000 barrels of crude oil per day and is expected to commence operations by 2012.

According to German foreign trade and inward investments agency Germany Trade and Invest (Berlin, Germany), Indonesia's petrochemical industry is expected to receive a $20 billion boost in investments. It added that the Indonesian industry's fast-climbing plastics demand is the driving factor for petrochemical feedstock manufacturing.

The Indonesia Aromatics, Olefins and Plastics Industry Association (INAplas) (Jakarta, Indonesia) believes that the severe lack of naphtha in the country has resulted in the country's petrochemical firms being unable to serve the rising domestic demand, especially for polyethylene and polypropylene (PP), both of which are used in the production of plastics for manufacturing packaging materials, electronic components and pipes, among others.

According to the INAplas, the domestic demand for PP hovers between 700,000 and 800,000 tons per year, which is much more than the available domestic supply, which accounts for 400,000 tons per year. However, INAplas forecasts that with new capacity coming up, Indonesia's PP capacity will touch 1.1 million tons per year in 2011 and 1.5 million tons per year in 2015, an increase of about 130% over the 655,000 tons of PP produced in 2008.

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