JAKARTA (TheInsiderStories)—ExxonMobil is entering the downstream industry by acquiring 100 percent shares of lubricant company PT Federal Karyatama and renting the fuel storages with a total investment of US$544 million.
ExxonMobil Vice President for Public and Government Affairs, Erwin Maryoto said on Thursday (03/05) the downstream and upstream oil and gas sectors still have potential for higher growth. He said Exxon will not only invest in the upstream sector but also in downstream and petrochemical industries.
ExxonMobil‘s action on its downstream oil and gas business has started since 2017 when the company reached a deal with PT Indo Prima Energy, a subsidiary of Salim Group, to supply industrial and commercial oil fuels in Java.
ExxonMobil expands its downstream sector in two areas, namely lubricants and fuel storage renting for industries. In the lubricants business, ExxonMobil has planned to acquire 100 percent interest of PT Federal Karyatama (FKT), a subsidiary of publicly listed motorcycle lubricant manufacturer PT Mitra Pinasthika Mustika Tbk (IDX: MPMX). This acquisition needs an investment of US$436 million.
ExxonMobil expects the transaction to be wrapped up in the third quarter of 2018, if not earlier. Currently, the acquisition is still waiting for the approval from the regulator. The acquisition includes a Federal Oil brand–an international lubricant brand, and a processing plant in Cilegon, West Java that produces 700,000 barrels of oil per year.
Maryoto said this acquisition will strengthen the company’s lubricants business. Previously, ExxonMobil has already had lubricant segment of four-wheeled vehicles. This acquisition expected to increase the company’s market share in the lubricant business as Federal Oil also has a large market share of lubricant for two-wheeled vehicles.
The Exxon’s oil business will further toughen the local lubricant market, which is 60 percent controlled by Pertamina lubricants. According to the Ministry of Industry data, there are currently 44 domestic lubricant companies with an installed capacity of 2.04 million kiloliters per year. However, the utilization of national lubricant production capacity only reached 42 percent or 858,360 kiloliters per year.
The production still does not fulfill the local demand that reached 1.14 million kiloliters per year. Consequently, there are 144 importers that sell 285,959 kiloliters of imported lubricants products.
In addition, ExxonMobil signed a contract on April 2018 with a subsidiary of PT Indika Energy Tbk (INDY) PT Kariangau Gapura Terminal Energi on the fuel storage development. This contract is worth US$108 million with 20-year time period and a 10-year renewal option.
Under the contract, the Kariangau Gapura Terminal Energi will build, own, and operate the fuel storage terminal in Kariangau, Balikpapan, East Kalimantan, that will exclusively store and distribute fuel for ExxonMobil.
The total capacity of storage is 100 million liters. The fuel supply for the storage will be taken from several ExxonMobil’s refineries in the Asia Pacific region.