Medco to take over Pertamina's methanol plant

By Johannes Simbolon

JAKARTA (JP): PT Medco Energi Corporation will take over the management and operation of state oil company Pertamina's methanol plant on Bunyu island, East Kalimantan, under a revenue- sharing contract.

"Both companies have finalized their negotiations and will sign a joint-operation (KSO) contract later this month," Medco's vice president, Robby J. Rompis, told The Jakarta Post yesterday.

Robby said that under the contract Medco would manage and operate the country's first methanol plant for 20 years while paying Pertamina fixed fees and a share in the plant's revenue.

"The contract is like a joint operation contract in telecommunications," he said, referring to state-owned PT Telkom's contracts with five domestic-foreign consortiums to operate and develop fixed telephone lines in all provinces, except Greater Jakarta and East Java.

The methanol plant, which was built in 1983, has had production problems for the last 10 years because of natural gas supply shortages to the island.

The plant has only produced 130,000 tons of methanol a year although its designed annual capacity is 330,000 tons.

Medco and Pertamina signed a memorandum of understanding several years ago to bring the plant to full capacity by supplying gas from Medco's gas field around Tarakan island, some 35 kilometers southwest of Bunyu.

Robby said the Tarakan gas field could supply the plant with 30 million cubic feet of gas a day for 20 years.

Robby said Medco had spent about US$30 million developing infrastructure to supply the gas, including the construction of pipelines connecting Tarakan and Bunyu which were completed last month.

"The plant will start full-capacity production between March and April," Robby said.

He said Medco would invest $20 million to overhaul and replace the plant's old machinery.

The plant's methanol would continue to be sold on the domestic market, which required 400,000 tons a year, but Medco had not yet selected its distributors, he added.

Robby refused to say whether Medco would retain Humpuss trading, which has been the sole distributor of Bunyu methanol.

"We shall use the former contractors of Pertamina. But Humpuss is not actually the sole distributor of the methanol. Two other companies have also acted as distributors though with very small volumes," he said.

The Humpuss group is negotiating with Medco to distribute the methanol under the joint-operation contract.

"Everybody knows we are the most experienced at distributing methanol domestically," said Abdul Wahab, the president director of PT Kalimantan Methanol Industri (KMI), a subsidiary of Humpuss group.

KMI is building a methanol plant in Bontang, East Kalimantan, which is to have an installed capacity of 660,000 tons a year. It will start commercial production in December.