It is projected to produce low-price synthesis gas needed in the energy, fertilizer and petrochemical industries.

PTBA signed a head of agreement last Friday with state energy giant Pertamina, state fertilizer holding company PT Pupuk Indonesia and Indonesia’s largest integrated petrochemical manufacturer, PT Chandra Asri Petrochemical, to jointly develop the plant.

The four companies will soon conduct a bankable feasibility study, prepare the environmental impact analysis (Amdal) documents, establish a joint venture to do the fundraising and find a partner for the engineering, procurement and construction (EPC) work.

The plant is expected to be constructed in early 2019 and be completed in November 2022. The facility will be able to generate synthesis gas that will be used to produce 500,000 tons of urea per year that will be absorbed by Pupuk Indonesia, 400,000 tons of dimethyl ether (DME) for Pertamina and 450,000 tons of polypropylene for Chandra Asri.

“This project is part of Bukit Asam’s efforts to transform itself from a mining firm into an energy company,” PTBA president director Arviyan Arifin said recently.

“We currently have 8.3 billion tons of coal resources and 3.3 billion tons of proven mineable reserves, which are enough to support the plant’s operations for around a century.”

The plant will be one of the first facilities constructed in the so-called Bukit Asam Coal-Based Industrial Estate (BACBIE), located near PTBA’s coal mining sites in Tanjung Enim.

The company also plans to start developing the Sumsel 8 mine-mouth coal-fired power plant in BACBIE in mid-2018 with a total capacity of 2 x 620 megawatts (MW) and investment totaling $1.7 billion.

The first and second unit of the plant will be completed in 2021 and 2022, respectively.

PTBA will eventually supply 9 million tons of coal per year, 5.5 million tons of which will be used to support the operation of the coal gasification plant, while the remainder will be allocated for the power plant.

“We want to expand the power plant capacity to 3,000 MW in the long run. With such a huge power supply, we will be able to support the development of various industries in the BACBIE, especially coal-based ones,” Arviyan said.

Pupuk Indonesia president director Aas Asikin Idat welcomed the partnership between the four companies, through which the fertilizer company hoped to secure a long-term gas supply with lower prices compared to current rates.

“We really hope to get more efficient prices because gas, which is a raw material for fertilizer, accounts for 78 percent of our production costs,” Aas said.

Moreover, Pupuk Indonesia plans to double the annual capacity of its nitrogen, phosphate and potassium (NPK) fertilizer factories to 6 million tons by 2019 with an investment of between Rp 7.5 trillion ($554.25 million) and Rp 10 trillion.

Chandra Asri president director Erwin Ciputra said his company would be able to secure additional polypropylene supply through this collaboration and eventually expand the capacity of its petrochemical plants in the future.

Throughout 2016, the company produced 428 kilotons of polypropylene, down 3.6 percent year-on-year (yoy).

Polypropylene can be used in a wide variety of applications, including packaging, automobile parts, construction materials and industrial fabrics.

Meanwhile, Pertamina investment planning and risk management director Gigih Prakoso also put high hopes on the development of the coal gasification plant.

The synthesis gas produced from the plant could be converted into methanol, which would later be dehydrated to form DME as an end product. DME can be used for blending in liquefied petroleum gas (LPG).

“At present, we still import about 70 percent of raw materials in producing LPG. So, we will be able to reduce the imports by using the DME,” Gigih said.

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