P

T Pertamina has inked a US$2 billion deal with United States-based company Celanese to develop a coal-to-ethanol converter facility in Indonesia.

Under the agreement, signed on Thursday, Pertamina would be responsible for arranging the ethanol distribution, determining the site’s location, as well as finding coal supply, while Celanese has agreed to sell its ethanol, used as a fuel additive, to supply fuel for Indonesia’s transportation needs.

“Our technology will help Indonesia in fulfilling its increasing fuel-for-transportation demand as well as reducing its fuel import up to 30 million barrels per year,” Steven Sterin, Celanese chief financial officer, said after the signing of the MoU in Jakarta.

Celanese, a global producer of specialty chemical products, introduced the so-called TCX technology last year in the US, claiming its technology to make ethanol from coal is more profitable than producing the gasoline additive from plants, and is a “game-changer” for the US chemicals company, Bloomberg reported.

Sterin said after Celanese received the approval from the government it would then take around 30 months to complete the construction of the facility, which was expected to convert as much as 4 million tons of coal per year into 1.3 billion liters of ethanol. He added that with Pertamina’s help, the company was looking for a location that had access to coal production and gasoline distribution sites.

Pertamina president director Karen Agustiawan said the cooperation with Celanese was in line with Indonesia’s priority to manage the energy resources to first fulfill increasing domestic demand.

As of June 2012, Indonesia’s total fuel consumption, including subsidized fuel, kerosene and biofuel, had reached 21.7 million kiloliters, with an average of 120 million liters consumption per month, Pertamina data showed.

The demand for consumer fuel is expected to increase 6 percent every year, at least until 2020, due to the increasing number of cars and motorcycles in the country.

A 10 percent blend of high-octane fuel ethanol by 2020 would potentially require up to four world-scale TCX Technology production units, which could reduce Pertamina’s gasoline import requirements by over 30 million barrels annually, Celanese said.

TCX technology converts coal, specifically lower-grade coal, into a gasified form before turning it into liquid.

Indonesia is the world’s second largest coal exporter with production over 275.16 million tons per year.

The government has planned to reduce the export of mineral raw material and instead use it for domestic needs or processing to provide added value.