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rude palm oil (CPO) producer PT Astra Agro Lestari (AALI), part of the PT Astra International conglomerate, will build a US$75 million refinery in Mamuju, West Sulawesi, in 2013 as part of its expansion plan.

The refinery will process the company’s crude palm oil into olein and stearin, and will have a production capacity of 2,000 tons per day, according to Astra Agro finance director Santosa.

“This [the refinery construction] is part of our effort to diversify our downstream business. We hope it will commence operations in early 2014. It will be our first refinery,” he said in Jakarta on Wednesday.

The refinery is not Astra Agro’s only project next year as the company will develop a rubber plantation and build more palm oil factories to support its existing business.

To realize these expansion projects, the company will prepare between $275 million and $300 million in funds. Some of the money will come from the company’s internal funds, while some will come from bank loans, Santosa said.

Astra Agro’s future rubber plantation will be located on 2,000 hectares of land in Kalimantan. In the past, Astra Agro also operated cassava, cacao and rubber plantations. It ceased their operations to focus solely on palm oil in 2005.

However, according to Santosa, the company has decided to revive its rubber business to utilize the rest of its current plantation area and to support the operations of Astra Otoparts, an Astra International subsidiary in the automotive component sector.

“Astra Otoparts will build a tire factory and will need rubber. So, by cooperating with Astra Otoparts, we will have a secure market for our product,” he said.

Astra Agro has not determined the number of new palm oil factories to build nor the amount of funds to be allocated for the construction. “In general, a factory with a capacity of 45 tons per hour requires $15 million for construction,” Santosa said.

The company is currently looking for suitable land in Papua also to establish a sugarcane plantation. The sugarcane project, Santosa added, was aimed at meeting domestic demand.

“The government wants Indonesia to be self-sufficient in food. At the moment, we are looking for 20,000 hectares of land to produce 10,000 tons of sugarcane per day,” he said.

As of October 2012, the company operated on 270,500 hectares of plantation areas. Of the total area, 42.3 percent is located in Kalimantan, 39.4 percent in Sumatra and 18.3 percent in Sulawesi.

It has produced 1.18 million tons of CPO so far this year, up 12.7 percent from last year. During the first 10 months of 2012, the average selling price of Astra Agro’s CPO was Rp 7,626 (79 US cents) per kilogram, a 0.8 percent decrease from 2011 as a result of oversupply and lower demand.

To address the supply and demand problem, Astra Agro plans to build more facilities to increase its CPO storage lifespan to two months from the current 1.5 months. “With a longer storage lifespan, our CPO can last longer and be used at a later time,” he said.