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Jokowi kicks off coal gasification project in S. Sumatra
Air Products and Chemicals, partnering with Pertamina and Bukit Asam, started on Monday the construction of a US$2.3 billion project in South Sumatra that will produce around 1.4 million tons of dimethyl ether (DME) per year.
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resident Joko “Jokowi” Widodo launched on Monday the construction of Indonesia's maiden coal gasification plant that is part of the government's coal downstreaming plans.
American industrial gas company Air Products and Chemicals is partnering with state-owned oil and gas giant PT Pertamina and coal miner PT Bukit Asam to develop the US$2.3 billion project in the Tanjung Enim Industrial Park in South Sumatra.
The project, which turns coal into dimethyl ether (DME), is expected to take 30 months to complete. The DME will mainly be used to substitute liquified petroleum gas (LPG) as cooking fuel.
Jokowi said the project was part of the government’s efforts to phase out LPG imports, which accounted for 80.5 percent of last year’s consumption at around 7.95 million tons.
“Once it starts producing, this project alone can reduce the subsidy from the [state budget] by around Rp 7 trillion (US$488.72 million),” Jokowi said in a press briefing on Monday.
“If we stop all LPG [imports] and replace it with DME, it is a really huge amount of money. We can reduce between Rp 60 trillion and Rp 70 trillion in subsidies from the state budget.”
LPG imports cost around Rp 77.8 trillion in 2021, according to the government. Between January and November 2021, the government spent Rp 53.7 trillion on subsidies for 3-kilogram LPG canisters, Finance Ministry data show. The subsidy spending was up 50.52 percent from a year earlier.
Read also: Indonesia to mix coal-based DME, LPG as cooking gas to reduce imports
The project will produce around 1.4 million tons of DME per year, which can substitute 1 million tons of LPG. It is estimated to be able to serve around 6.6 million households in South Sumatra and nearby areas, Jokowi said.
“We hope that with the support of Bapak President, ministries and agencies, the development of this DME factory will run smoothly,” said Bukit Asam business development director Rafli Yandra.
The government has agreed to give certain fiscal incentives for Bukit Asam to develop the costly DME factory.
Read also: Govt grants incentives to Bukit Asam’s coal gasification project
Overall, Air Products and Chemicals is committed to investing around $15 billion in the coal downstream industry in Indonesia. The government secured this commitment during Jokowi's state visit to the United Arab Emirates (UAE) in November 2021.
Investment Minister Bahlil Lahadalia said the DME project was estimated to create up to 13,000 jobs from the construction and Pertamina was also expected to create around 12,000 jobs in the downstream industry. When it starts operating, the project itself is expected to create around 3,000 full time jobs.
