Consortium to build ethylene plant in W. Java

JAKARTA (JP): A consortium of British Petroleum subsidiary BP Chemicals Ltd, Indonesia's PT Salim Chemicals Corporation and four Japanese companies will build a naphtha cracker complex to produce ethylene and propylene in Bojonegara, near Merak, West Java, BP Chemicals said yesterday.

The four Japanese companies are Sumitomo Corp., Tomen Corp., Nichimen Corp. and Mitsui & Co. Ltd.

BP Chemicals' director of chemicals development-Indonesia, James M. Hay, said the companies had signed a memorandum of understanding last month which assigned BP Chemicals to lead a feasibility study and, if the study was successful, to lead the project's development.

Shareholding arrangements were still under negotiation, he said.

Hay said the project would need an investment of about US$700 million, including $250 million for machinery and $250 million for construction.

Hay expected that the feasibility study would be completed in April or May and construction would start in early 1998.

He said the cracker would produce 700,000 tons of ethylene and 300,000 tons of propylene annually when it came on stream in 2000.

"The cracker will become one of the world's largest," he said.

Ethylene is a raw material used to produce polyethylene, which is used for packaging, pipes and containers. It is also used to make ethylene oxide and ethylene glycol which are used for brake fluid, antifreeze and polyester fibers.

Propylene is used to produce polypropylene, which is used for casting moldings, furniture and toys. It is also used to make isopropanol, which is used for solvents in synthetic lacquers, cosmetics and paints. And it is used to make acrylonitrile, which is used for textiles, fibers and plastics.

Indonesia, he said, needed about 800,000 tons of ethylene a year and demand was expected to increase to 1.7 million tons by 2000.

The country's sole producer of ethylene is Chandra Asri, which has a plant near Merak with an annual capacity of 522,000 tons.

Domestic demand for propylene is about 650,000 tons a year. It is expected to reach one million tons by 2000

The country has two propylene producers: Chandra Asri with an annual capacity of 243,000 tons and the state-owned oil and gas company Pertamina, which has a refinery in Indramayu, West Java, with an annual capacity of 186,000 tons.

Hay said the cracker in Bojonegara would sell to local companies, including PT Peni, PT Styrindo Mono Indonesia (SMI) and PT Satomo Indovyl Monomer.

PT Peni, which built the country's first polyethylene plant, is 51 percent owned by BP Chemicals, 12.5 percent by Mitsui & Co, 12.5 percent by Sumitomo, 9 percent by President Soeharto's eldest son Sigit Harjojudanto and 15 percent by PT Arseto Petrokimia.

Peni, which produces 250,000 tons of polyethylene yearly, buys 50 percent of its ethylene from Chandra Asri and imports the rest.

PT SMI, which manufactures styrenes, is 75 percent owned by Tomen, 10 percent by Salim group, 10 percent by Bimantara group and 5 percent by Idemitsu.

PT Satomo Indovyl, which produces vinyl chloride monomer and ethylene dechloride is 75 percent owned by Salim group and 25 percent by Sumitomo. (jsk)