PT Chandra Asri Petrochemical Tbk (IDX: CAP) launched a three-year bond issuance with total amount of Rp750 billion (US$52.82 million) - Photo by the Company

JAKARTA (TheInsiderStories) PT Chandra Asri Petrochemical Tbk (IDX: TPIA), an integrated petrochemical company in Indonesia, prepares second petrochemical factory with costs US$5 billion, said the company in a statement on Sunday (29/04).

The factory located in Cilegon, Banten province, treading in the footsteps of recent election-related technology to the construction of the second petrochemical complex in Indonesia.

“As part of our strategy growth to meet the demand for petrochemical product in Indonesia, our unit PT Chandra Asri Perkasa to conduct a feasibility study for the second complex with an estimated total investment of $5 billion,” said Erwin Ciputra, President of Chandra Asri.

The second complex will produce 1.1 MMTA Ethylene, 600 KTA propylene, 175 KTA Butadiene, Benzene KTA 363, 450 KTA and 450 KTA PP HDPE for surgery full year. He said, its unit will complete the basic engineering design in late 2018 and the final investment decision is expected to have at the beginning of 2020 and operating in early 2024.

“We are optimistic that the execution of the project will run smoothly, with of course the support and incentives from the government as one of the 10 industries that are prioritized in the National Industrial Development Master Plan 2015-2035 year,” Erwin added.

This new petrochemical targeted to reduce the number of Indonesian imports olefin and polyolefin which now consists of more than 2 million metric tons per year.

Previously in February, 2018, the company joined with Thailand’s Siam Cement Group (SCG) has commenced the groundbreaking of a new Polyethylene Plant project with a capacity of 400 kilotons per annum. At present Siam Cement holds 30 per cent stakes in Chandra Asri.

This new polyethylene plant facility will produce High Density Polyethylene, Linear Low Density Polyethylene, and Metallocene LLDPE. The rapid growth of the plastics and packaging industries in Indonesia has driven TPIA to anticipate the high domestic demand.

The total investment cost for the project is estimated $350 million. The completion of project is scheduled by the end of 2019 and commence operation at the beginning of 2020.

The Company currently operates a 336 KTA of polyethylene plant, therefore, this new construction of 400KTA PE plant will bring total CAP’s PE production to 736 KTA.

The Indonesian government welcomes the plan of the SCG to develop a mega petrochemical project in Cilegon, Banten province. The development of the petrochemical plant is expected to reduce downstream industry’s dependence on imported petrochemical raw materials.

Industry Minister Airlangga Hartato said the project will become the largest petrochemical project to be built in Indonesia as well as Thailand.

“It (SCG) will add investment of around $5.5 billion. Hopefully, it would commence production by 2022,” Hartarto said at the State Palace last March.

He said, President Joko Widodo support the company’s plan given that Indonesia’s petrochemical industry at present is still relying on imported raw materials. At present, domestic production of naphtha cracker reached only 900,000 tons, while demand reached 1.6 million tons. Therefore, Indonesia has to import the raw material to cover the gap.

The country’s naphtha cracker output is far behind that of Singapore totalling 3.8 million tons per annum and Thailand 5 million tons per year.

Hartarto noted that the group’s mega petrochemical project could be viable to get tax holiday from the government, which is being finalized by the government.

The government, said Hartarto, expects to issue tax holiday policy by the end of this month. Some strategic industries, including petrochemical, could obtain such tax incentives.

The Siam Cement’s petrochemical plant will produce naphtha cracker, polypropylene and polyetheline with a planned capacity of 1.2 million tons per annum. Its output will be mainly allocated to meet domestic industry needs.

In addition to SCG, the Malaysian-based Genting Energy Ltd, which is currently developing a gas block in Bintuni, West Papua, has also unveiled its plan to develop a petrochemical complex in the Bintuni area, West Papua, in cooperation with an investor from China.

The planned project will be separated from the Indonesian government plan to develop a gas-based petrochemical industrial complex in Bintuni area, one that will process the natural gas produced by Tangguh LNG project, developed by BP.

The development of the petrochemical plant is an effort by the company to support the Indonesian government’s plan to develop the country’s downstream petrochemical industry and make use of the gas output from the Kasuri gas block in Bintuni.

TPIA, a subsidiary of PT Barito Pacific Tbk (IDX: BRTP), an integrated petrochemical company producing olefin and polyolefin. Today, the CAP is the largest a manufacturer of petrochemicals in Indonesia with an estimated domestic market share of 52 percent for Olefin, 24% for polyethylene, and 29% for Polypropylene.

Chandra Asri Perkasa itself was established in April 2017.