Salim invites PT Peni to build cracker plant

JAKARTA (JP): A joint venture comprising British Petroleum Chemicals (BP), Salim Chemicals Corporation and four Japanese companies has invited petrochemical company PT Peni to be involved in a cracker project in West Java.

The integration changed the ownership of PT Peni, which was formerly 51 percent owned by BP, 12.5 percent by Sumitomo Corporation, 12.5 percent by Mitsui and Co., 9 percent by President Soeharto's eldest son, Sigit Harjojudanto, and 15 percent by the Arseto Group.

PT Salim Chemicals Corporation will own a 20 percent stake in PT Peni and a consortium led by the Salim Group will own 20 percent.

BP's stake in Peni will be reduced to 35 percent, while Arseto Group and Sigit will have a 10 percent stake, and a Japanese consortium comprising Mitsui, Sumitomo, Tomen Corporation, and Nichimen Corporation will own the remaining 15 percent.

BP's director of chemical development in Indonesia, Jim Hay, said it was not yet clear as to which companies would be in the Salim consortium.

PT Peni will complete the cracker project, which is due to begin next year, in Bojonegara on the west coast of Java. The plant is expected to start operation by the end of 2000.

Hay said the cracker plant would benefit from captive demand from derivative plants owned by the partnerships in the newly restructured PT Peni.

Salim and Sumitomo are shareholders in PT Satomo Indovyl Monomer, a producer of vinyl chloride monomer and ethylene dechloride, while Salim and Tomen are shareholders in PT Styrindo Monomer Indonesia, a styrene producer.

"Together this provided a high cracker loading from start-up," Hay said.

He said the cracker plant might cost between US$800 million and US$1 trillion.

He said the project would be financed from loans from commercial banks, private placements and Export Credit Agencies.

The plant will be able to produce about 900,000 tons of ethylene annually, he said. Ethylene is a raw material used to produce polyethylene, which is used for packaging, pipes and containers.

PT Peni currently produces 250,000 tons of polyethylene yearly, 90 percent of which is sold domestically. It buys 50 percent of its ethylene from PT Chandra Asri and imports the rest.

Hay said the growth of the country's petrochemical sector was somewhat slow, but in time it would recover.

The industry will have a slow growth for about 18 months because of delayed projects and companies' inflated foreign loans, but the situation will go back to normal, he said.

"In the West, we are used to experiencing a little slowdown in the industry because of recession," he said.

"But in every recession something good comes up, as inefficient ones subside and the strong ones endure. It is a cycle that in turn benefits us," he said.

He added that although economic growth was predicted to be lower next year, it would still be much higher than in many Western countries where it was usually no more than 2.5 percent, he said. (das)