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[News] Becoming a World-Class Player
Prajogo Pangestu invested more than $2 billion in Chandra Asri to make it the biggest player in Indonesia’s petrochemical industry.
When tycoon Prayogo Pangestu his shareholding in Chandra Asri (CA) in 2008 and Singapore company Temasek Holdings joined the venture, it was clear that Prajogo had transformed his business from a troubled forest concession and plywood concern to a petrochemicals enterprise.
Company insiders say CA, in which Prajogo was a founding partner, has now become his “beloved baby”.
The company has become the biggest player in olefins business, producing 680,000 tons per year of ethylene and propylene at March this year, while production capacity is over 920,000 tons. The company also produces 283,000 tons of PY gas and crude C4 from a capacity of 500,000 tons per year.
Looking ahead, spokeperson of PT CA Suhat Miyarso says the company is working hard to become a world-class company and has invested around $ 160 million to increase the capacity of its naphtha crackers. This is to boost ethylene production to 600,000 tons per year from the current 454,579 tons, propylene to 320,000 tons per year (237,125 tons), and PY gas to 280,000 tons per year (172,239).
Polyethylene production should rise to around 320.000 tons per year from 111,372 tons. The company also plans to extend its supply pipeline network to improve customer convenience.
Obstacles to overcome
The company has also acquired PT Styrindo Mono Indonesia, the nation’s only styrene monomer producer, with capacity of around 340,000 tons per year. CA spokeperson Suhat Miyarso says the company will also invest in an added value C4 project through the development of Indonesia’s only butadiene extraction plant with investment of around $ 100 million to build an LPG storage facility at its site at Anyer in Banten province.
Suhat says the company has dreams of building a naphtha cracker plant, which will cost around $ 1 billion, in the next five years, a project that would include refinery. Up until now, although CA is the biggest player in the industry, it still imports its entire naphtha supply. Suhat says that only the doubling of domestic refinery capacity will alleviate serious supply problems in the future.
To achieve this, the company is asking for government support, especially in providing good supporting infrastructure and reviewing other regulations such as the labor laws.
“We can only transport goods once a day from Banten to Jakarta because the road is poor,” says Suhat. Guaranteed supplies of electricity and crude oil – the basic materials of production – are essential for the future of the business.
Suhat adds that in some cases, regional regulations are irrational and create an unfair burden, such as the requirement to pay tax on power used for street lighting, even though the company itself produces the electricity.
The company achieved sales of $1.6 billion last year. It has been supplying styerene monomer to giant industry players like Dow Chemicals from the US and Germany’s BASF since 1992. Polyethylene accounted for 28% of CA’s sales last year, followed by propylene (20%) and styrene monomer and PY gas (19% each) and ethylene (14%).
Source: Globe Asia Magazine, volume 4, number 4 - April 2010
