State-owned construction company PT Rekayasa Industri signed on Wednesday a US$173 million contract with PT Kaltim Nitrate Indonesia to build the largest ammonium nitrate plant in Southeast Asia.
Ammonium nitrate is an explosive used mostly in mining industries.
Kaltim Nitrate Indonesia, the plant owner, is a joint venture of Australian company Orica Limited and local company PT Armindo.
"This is the largest investment by an Australian investor since the financial crisis in 1997," said Australian Ambassador, Bill Farmer during the contract signing ceremony.
Armindo owns 51 percent of Kaltim Nitrate shares, the rest being owned by Orica, the world's largest supplier of commercial explosives.
Director general for agro and chemical industries at the Industry Ministry, Benny Wahyudi, said Indonesia relied heavily on imports of ammonium nitrate.
According to Benny, some 90 percent of the explosives material required for domestic consumption was imported last year.
"Last year, Indonesia paid US$150 million to import 350,000 tons of ammonium nitrate to meet domestic demand," he said.
Indonesia's only ammonium nitrate producer PT Multi Nitrotama could supply 40,000 tons last year.
"For this year, the ministry predicted domestic consumption would reach 400,000 tons and this would increase by 10 percent annually.
"Therefore, the construction of the plant is vital to cut import costs," Benny added.
The plant will be built on 10 hectares of land in Bontang, East Kalimantan. It will have the capacity to produce 300,000 tons of ammonium nitrate a year, or an average of 970 tons a day.
The project construction will start in July and is expected to be completed in the second quarter of 2011. The plant is designed to have an operating life span of 20 years on completion, according to Antung Pandoyo, president director of Kaltim Nitrate.
The plant would consume 150,000 tons of ammonia annually, provided by PT Kaltim Parna Industri and PT Kaltim Pasifik Amoniak. Both companies are also located in Bontang.
Antung added that after the construction was completed, the plant would provide about 2,300 new jobs.
Rekayasa president director Triharyo I. Soesilo said that the construction project would create jobs for about 1,000 Indonesian workers and engineers.
Triharyo said further that his company would be using licensed technology from one of the world's leading engineering companies UHDE Germany and would be making use of approximately 45 percent local content by value.
Orica Limited's group manager for manufacturing, Ian Gilmore stated that both plant construction and the production system would meet all required international environmental and safety standards.
He confirmed that about 10 percent ($17.3 million) of the construction costs would be used to meet the environmental and safety standards. Another 1 percent ($1.73 million) would be used for corporate social responsibility activities in Bontang.
Ian added that Kaltim Nitrate had already spent about $70 million to design the project, buy the land for the plant, and buy equipment for the plant's construction. (mrs)
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