Publicly listed petrochemical firm PT Chandra Asri Petrochemical (TPIA) submitted on Monday an application for an investment principle permit for the construction of an olefin factory in Cilegon, Banten province, to the Investment Coordinating Board (BKPM).

The plant will be built and managed by new TPIA subsidiary PT Chandra Asri Perkasa, with a production capacity of 1 million tons a year, as part of the petrochemical giant’s ethylene production expansion.

“We are currently producing 860,000 tons of ethylene a year, while national demand is about 1.6 million tons per year,” Chandra Asri Perkasa director Suhat Miyarso said after the official submission of the permit application to the BKPM.

The new subsidiary will invest about US$1.95 billion in the initial stage for the construction of the ethylene plant, which is expected to begin operations in 2021. The total investment is expected to reach $5 billion, which will be financed by internal funds and bank loans.

Ethylene, a form of olefin products, is a basic material produced from the naphta cracker plant to produce other chemicals essential to producing plastic.

Indonesia is the fourth-biggest ethylene producer in Southeast Asia, with TPIA as the biggest player in the sector.

The company announced las month a plan to establish a new production facility, which will need multibillion dollar investment.

The new production facility will comprise a naphtha (a derivative of crude oil) cracker to produce ethylene, as well as other machinery to produce polyethylene (PE), polypropylene (PP), butadiene and styrene monomer. All will sit on a 100-hectare plot of land near the firm’s existing production site in Cilegon.

“The new production site will strengthen Indonesia’s position as the fourth-biggest ethylene producer in ASEAN and reduce the country’s dependence on imports,” Chandra Asri vice president for corporate relations Suhat Miyarso said in a press conference.

PE is a mixture used to produce plastics and pipes, while PP is used for automotive plastic components, among other things. Both are among the rarest chemicals for plastics in the country.

TPIA imports 100 percent of its naphtha, mostly from the Middle East, since state-owned energy firm Pertamina does not sell its production to other companies.

Indonesia still imports 54 percent of 5.2 million tons of chemicals it needs for plastic, according to data from the Olefin, Aromatic and Plastic Industry Association (INAplas). Demand in the industry is projected to hit 7 million tons by 2020.

Thailand, the region’s biggest ethylene-producing nation, has a total production output of 5 million tons of ethylene per year, followed by Singapore and Malaysia, with 3.8 million tons and 2 million tons, respectively.

The government previously urged Chandra Asri to bring the construction forward so the plant could start running by 2021, earlier than the firm’s previous target of 2026.

“We’ve talked to them about starting sooner and we will provide a tax holiday, as well as safeguards [against imported materials], should they need them,” Industry Minister Airlangga Hartarto said recently. (ecn)

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