PT Surya Esa Perkasa (ESSA), a liquefied petroleum gas (LPG) refinery operator, is investing approximately US$100 million this year to fund two major projects that would boost its current production.

Of the $100 million, $80 million would be channeled this year for the construction of a $750 million ammonia facility in Banggai, Central Sulawesi, and $21 million would be set aside from its capital expenditure to finance the expansion of its existing LPG refinery in Palembang, South Sumatra.

Chander Vinod Laroya, executive director of the Jakarta-listed firm, says ESSA, through subsidiary PT Panca Amara Utama, has started the construction of the ammonia facility.

'€œThe facility will have a production capacity of approximately 700,000 metric tons per year,'€ he said on Monday, adding the facility would begin production in 2015.

He added the company had secured $500 million for the ammonia facility project in International Finance Corporation (IFC) loan, which would earn the IFC a 10 percent equity worth $25 million, while seeking another $80 million to be channeled this year and the remainder next years.

ESSA is also expanding the production volume of LPG at their Palembang refinery by more than half in a project that requires $21 million of capital expenditure.

'€œWe seek to increase production from 120 to 185 tons per day,'€ Laroya said, adding the expansion work would wrap up by the middle of
next year.

ESSA president director Garibaldi Thohir said the government'€™s policy to entirely replace kerosene with LPG had in part boosted demand for LPG, which then prompted the company to expand. '€œThe economy rises between 6-6.5 percent annually and so will the demand for energy. This will drive energy and gas-related businesses,'€ he said.

The projected rise in LPG production follows the company'€™s recent rebound in production volume, which had slumped in the second and third quarters of last year following repair work at the refinery to '€œoptimize gas supply'€.

Laroya noted that LPG production slid by 10.8 percent in 2012 from a year earlier to 35.221 metric tons, whereas the company had booked a 15.8 percent compound annual growth rate (CAGR) between 2008 and 2011.

The production decrease had led ESSA'€™s net profit to nosedive to $5.2 million last year by 62 percent from the previous year. The company recorded $3.7 million in net profit in the first quarter this year, down by 4.8 from the same period last year.

That drop, according to Laroya, resulted from new terms reached with state-owned oil and gas company PT Pertamina '€” both the supplier of raw material and buyer of ESSA'€™s end products.

Under the new terms, Pertamina has exempted ESSA from having to pay for the supply of gas required in condensate production, which consequently lowers the price of condensate it sells to Pertamina.

ESSA'€™s shares were closed at Rp 2,750 (28 US cents) on Monday, about the same level as the day before.

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