PGN expects to complete a feasibility study on the plan with fellow national refiner PT Kilang Pertamina Indonesia (KPI) between 2022 and 2023, said PGN president director Suko Hartono on Monday.

He said the distributor wanted to convert natural gas into methanol and dimethyl ether (DME). Methanol can be used to produce biodiesel while DME can substitute liquefied petroleum gas (LPG) – a chemical derived from crude oil – to produce cooking gas.

“But we will limit this to 5-10 percent, maximum 15 percent, of our portfolio. Because this is not our main business,” he told House of Representatives lawmakers in Jakarta.

PGN, he noted, was looking to source gas for the project from major oil and gas projects in East Java, South Sumatra and Kalimantan.

Oil and gas imports are a leading contributor to Indonesia’s trade deficit that puts pressure on the rupiah exchange rate and is thus a key vulnerability for Southeast Asia’s largest economy.

Oil and gas recorded a US$9.35 billion trade deficit last year versus a $6.15 billion non-oil and gas trade surplus, Statistics Indonesia (BPS) data show. During this year’s January-May period, the commodities booked a $3.36 billion trade deficit while non-oil and gas racked up a $7.67 billion trade surplus.

Indonesia consumed 7.6 million tons of LPG last year, 74 percent of which was imported, according to Energy and Mineral Resources Ministry data.

Indonesia’s main strategy to cut LPG imports is by expanding its household gas pipe network (jargas), which channels domestically produced natural gas. However, the network’s reach is still very limited. Even certain neighborhoods in Jakarta, the nation’s capital, are unable to access the network.

Instead, over 60 percent of Indonesian villages rely on LPG as a staple cooking fuel, which is sold in green, pink and blue canisters, BPS 2018 data show.

Demand for biodiesel is also expected to rise in Indonesia over the coming years alongside the growing demand for commercial transportation and the government’s continual escalation of its palm oil-mixed biodiesel program.

Fajriyah Usman, the spokeswoman for Pertamina, which is PGN and KPI’s parent company, said PGN’s petrochemical plan was still at an early planning phase.

“But Pertamina is prioritizing this plan to immediately reduce LPG and fuel imports,” she told The Jakarta Post.

However, an industry expert pointed out that current economic conditions were not ideal for PGN to start producing such petrochemicals as crude oil prices were at record lows amid the ongoing health crisis.

“With COVID-19 going on, the timing is not ideal,” said Fajar Budiono, secretary general of the Indonesian Olefin, Aromatic and Plastic Industry Association (Inaplas).

He estimated that the facility’s engineering process alone would take at least 3.5 years. Assuming PGN completed its feasibility study this year, the facility would only be operational by 2025, at the earliest.

“Hopefully, methanol and DME prices will improve by then,” he said.

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