Leading Australian fertilizer firm Incitec Pivot Ltd. (IPL) agreed Tuesday with two Indonesian partners to conduct a joint feasibility study on building a plant to supply three fertilizer plants in Aceh with feedstock, electricity and steam.
IPL signed the agreement with state-owned holding company PT Pupuk Sriwijaya (PUSRI), which owns fertilizer producer PT Iskandar Muda (PIM), which operates the three ammonia and urea plants, and state-owned engineering firm PT Rekayasa Industri.
The project, if it turns out to be economic, would involve IPL investing between US$700 million and $800 million on the building of a new gasification plant to convert Indonesian coal into synthesized gas, the Australian embassy here said in a statement.
All three plants are currently producing well below capacity because of lack of gas feedstock. The three ammonia/urea plants have a production capacity of more than 1.7 million tons annually, but are currently capable of producing only 300,000 tons because of the gas shortage.
The feasibility study is expected to be completed by the first quarter of 2008.
IPL managing director & CEO Julian Segal said that although the company had been discussing the project with the Indonesian side for some months, it was "still early days" in what would be an "exhaustive" examination of the project's prospects in the months ahead.
"Most of all, we need to be completely satisfied that any project would meet our strict investment criteria," Segal said.
Australia's minister for trade, Warren Truss, who together with Indonesia's state minister for state enterprises, Sofyan Djalil, presided over the signing of the statement of mutual intent, said that the statement's signing could pave the way for major new Australian investment in Indonesia.
Truss said that, should the project proceed, it would represent a "significant and very welcome strategic partnership" between Australian and Indonesian corporations that would benefit both countries and the region.
"I understand that under this proposed arrangement, PIM's fertilizer plants will remain Indonesian owned and operated," he said. "In return for its substantial investment in these plants, IPL would secure a supply of ammonia and urea to sell on the Australian agricultural market and to trade on world markets."
He said a number of Australian companies, including IPL, had committed to investing about A$2.5 billion in Indonesia's oil and gas, mining, fertilizer, railway transportation and trade sectors, reflecting the neighboring country's growing interest in the Indonesian economy.
Truss said he had no doubt that IPL would be an excellent partner for PIM and Rekayasa, stressing that IPL is a leading manufacturer of fertilizer to farmers in Australia's eastern and southern states, supplying more than 50 percent of Australia's agricultural plant nutrient needs.
It operates five manufacturing plants in Australia and maintains an extensive distribution network across eastern and southern Australia. IPL supplies about three million tons of fertilizer a year, generating sales revenue in excess of A$1 billion annually," the minister said.
As of the end of 2006, two-way trade volume between Indonesia and Australia reached A$10.4 billion, making the country Indonesia's thirteenth largest trading partner.(11)
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