PT Kaltim Parna scheduled to produce ammonia by 2002

By Berni K. Moestafa

BONTANG, East Kalimantan (JP): After years of delay, PT Kaltim Parna Industri began on Thursday the construction of its ammonia plant in Bontang, East Kalimantan, setting 2002 as its first production year.

Kaltim Parna president Naohiko Munakata said the decision to finally start the construction of the US$240 million plant followed several years of delay due to the economic crisis.

"It was a tough decision for all shareholders whether to proceed with this project or not," Munakata said during a ceremony marking the start of the plant's construction.

He said in 1997 when Japanese investors Mitsubishi Corporation and Asahi Chemical Industry entered Kaltim Parna with 55 percent and 10 percent shares respectively, they envisioned to build a world-class ammonia plant in Indonesia.

Aside from Mitsubishi and Asahi, Kaltim Parna is 25 percent owned by transportation company PT Parna Raya and 10 percent by the foundation which runs the pension fund for the employees of PT Pupuk Kaltim, a major state-owned fertilizer company also operating in Bontang.

Munakata said the ammonia plant, with an annual production capacity of 500,000 tons, largely aimed to supply Southeast and East Asian markets like Thailand and the Philippines, China and Japan.

However, the economic condition in the following years made it difficult to realize the project, he added.

"Throughout 1998 to 1999 we devoted much of our time to reassess the viability of this project," Munakata said.

He said the plant's strategic location in the Bontang industrial estate, which has easy access to natural gas supplies from state oil and gas company Pertamina and Bontang's complete infrastructure, favored considerations to continue the project.

Last year, Pertamina signed a 20-year contract to supply Kaltim Parna with natural gas for its ammonia plant located about 13 kilometers from the gas field.

"Bontang is also geographically close to our export markets in Asia," Munakata said.

The company targets to operate 75 percent to 80 percent of the plant's capacity during the first year of production in 2002. Production will increase to full capacity in the second year, he said.

The senior vice president of Mitsubishi Corps' Chemical Group, Shunichi Inai, said he was optimistic that Kaltim's plant would become the world's most competitive ammonia plant.

"If everything runs smooth in the next two years, our ammonia production will be the most competitive in the world," Inai said.

He cited the abundance of natural resources, skilled labor in the Bontang area and its proximity to its export market, as factors of support to the production of high quality and competitively priced ammonia.

Kaltim Parna needs to be highly competitive to survive tight competition in the market, he said, adding that demands for ammonia as a raw material for fertilizer and the production of various chemicals would continue to grow in Asia.

Asked whether Mitsubishi would expand its investment in Indonesia to ammonia-related industries like urea and acrylonitrile, Inai said the company would look into the option to further compete in the ammonia market. (03)