Home News South Korean LG To Build Petrochemical Plant in West Papua

South Korean LG To Build Petrochemical Plant in West Papua

Photo by Ministry of Industry

JAKARTA (TheInsiderStories) – South Korean LG International Corp., join with its local partner PT Duta Firza ready to develop petrochemical plant in West Papua after getting the assurance to get gas supply from Bintuni Bay in West Papua and Masela Block in Maluku.

Director General of Manufacture Industry at the Ministry of Industry, Harjanto has said there were two trillion cubic feet of gas reserves in Bintuni. The gas reserves in Bintuni are believed to be sufficient to meet the industry’s needs in the region.

The project is estimating need costs US$1.3 billion and targeting to produce 1 million tons of methanol per year. Petrochemical plant that will be worked on is estimated to take three years for the construction process.

First phase, LG plant would get 257 mmscfd supplied with operation target in 2021, producing methanol, ethylene, propylene, polyethylene, and polypropylene. Second phase, LG plant would get 90 mmscfd by 2026 for ammonia plant.

At the meeting with CEO of LG International Chi Ho Song in Seoul on July 3, Minister for Industry Airlangga Hartarto said this project will need natural gas of up to 90 million standard cubic feet per day with expected price of $1 per million british thermal units.

“Now LG is still conducting a feasibility study in Bintuni,” he said in a press statement by adding about 90 percent of the factory’s production will be exported. The existing methanol will be used for petrochemical industry raw materials.

This will provide higher added value when the methanol from the LG plant can be processed down to the derivative products then absorbed in the country.

The government since 2015 designed Bintuni Bay as a gas-based petrochemical industry. According to Harjanto, beside LG and Duta Firza there are other investors who want to invest in Bintuni Bay Special Economic Zone like Germany’s Ferrostaal Industrial Projects GmbH, Japan’s Asahi Kasei Chemicals, Mitsui, Sojitz, PT Chandra Asri Petrochemical Tbk (IDX: CAPC) and PT Pupuk Indonesia.

The investment development of the Bintuni Bay petrochemical industry and its derivatives industry is expected to contribute substantially to the strengthening of the national petrochemical industry. The Ministry of Industry wants the dependence of petrochemical imports of $10 billion per year to be reduced.

The Industry Ministry recorded the potential of petrochemical industry development in Bintuni as two natural gas reserves, operated by BP Tangguh (23.8 trillion standard cubic feet/TSCF) and Genting Oil Kasuri Pte, Ltd (1.7 TSCF), would support. This area will be developed for petrochemical plants which will produce natural has in two phases.

“For Masela, government and operator are now calculating the feasible gas reserves and the allocation of natural gas. For producing LNG and reserves for chemical industry, government plans to apply the gas pipe scheme,” Airlangga said.

There are four areas to be developed as the on-shore gas exploration in North-west Maluku (220 km), South Maluku (180 km), Aru Islands (600 km), and South-east Maluku (600 km).

Achmad Sigit Dwiwahjono, Director General of Chemical, Textile and Multi Various Industry, said government will provide facility and incentives for investors who want to build petrochemical industry, including developing the infrastructure.

In 2016, government has built new road (Trans Papua) as the commitment to develop eastern part of Indonesia. The government has also developed basic infrastructure such as water, electricity, and port for industry.

He added, that the capacity of petrochemical industry continued to grow since 2010 with average production of 840,000 tons per annum. In 2016, the capacity of petrochemical industry totaled 33,727 million tonnes per annum.

Indonesia is the fifth largest petrochemical industry but the challenges hit three products; olefin, methane and aromatic. Now the petrochemical industry in Indonesia produced 42 products, with main products such as urea, ammonia, ethylene and propylene.

According to data from the Central Statistics Bureau, Indonesia imported petrochemical products at value of $19.03 billion in 2016, while export reached $10.84 billion.

LG engages in the coal, petroleum, non-ferrous metals, and palm businesses in South Korea.

(Written by Linda Silaen, Email: linda.silaen@theinsiderstories.com)