BP Batam, a newly established state agency tasked with managing and developing industrial areas in the island, has given a permit to Enerco RPO Internasional, a subsidiary of Singapore-based Enerco Chemical, to build the plant in the region with a total investment value of Rp 1.3 trillion (US$98.8 million).

The deal, signed on Monday at the Office of the Coordinating Economic Minister, also included local firm Kabil Citranusa, owner of the Kabil Integrated Industrial Estate (KIIE) in Batam, which will provide a 2.3-hectare site for the facility.

BP Batam head Hatanto Reksodipoetro said the agency would facilitate all licensing processes for Enerco under a government incentive program called the direct construction investment incentive (KLIK) in order to expedite the factory’s construction.

“I’m working hard to make the permit process more efficient and we should accelerate the next steps to develop other infrastructure in the island, particularly the seaport and airport,” he said.

Batam refers to both an island and municipality in the Riau Islands. Home to more than 1 million people, Batam is also the third-largest city in Sumatra after Medan in North Sumatra and Palembang in South Sumatra.

Enerco RPO International commissioner Hendro Sutandi said the facility would become the country’s first and also the biggest in Asia for producing environmentally friendly processed rubber oil, which is one of the raw materials for tire manufacturing based on international standards.

Global regulations restricting tires made using hazardous materials have increased the demand for high-quality tires using new types of synthetic rubber, he said.

The facility will have a total production capacity of more than 100,000 tons of treated distillate aromatic extract (TDAE) rubber oil per year with a technology owned by national private companies partnering with state-owned firms.

Enerco will also work with European engineering and manufacturing companies to construct the facility and will partner with US-based ExxonMobil to support raw material supplies from Singapore.

For overseas marketing and distribution of the rubber oil products, the investors have signed a partnership agreement with Sumitomo Corporation Asia and Oceania Pte. Ltd.

Meanwhile, Coordinating Economic Minister Darmin Nasution said the government welcomed the deal as no new investors had come to Batam in the past few years, he hoped that it would assist the agency in developing the area into a special economic zone (KEK) in the future.

He said the engineering process for the facility had been prepared since October last year, so the process for procurement and construction could start soon in order to achieve the completion target next year.

“The selection of Batam for the facility construction is also based on the island’s tax-free zone and policies issued by BP Batam and the local administration to facilitate the permit process,” he said.

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