"Indonesia Petrochemicals Report Q3 2016" is now available at Fast Market Research

The overhaul of Indonesian petrochemicals producer Chandra Asri Petrochemicals ' cracker in 2015 will boost the firm's revenues and output in 2016, and enable Indonesia to leverage the competitive advantages it enjoys in naphtha feedstock as well as the falling value of the rupiah. However, the market remains dependent on imports , and expansion is not happening at a pace fast enough to fulfil local demand. The development of a world-scale petrochemicals facility is still at least five years away, and in the meantime much of Indonesia's market growth will be served by imports.

Indonesia has a high level of import requirements and would need a world-scale petrochemicals complex to achieve self-sufficiency. In all, Indonesia had just 44% self-sufficiency in polymer resins in 2015, with demand for polyethylene (PE) and polypropylene (PP) at 3.11mn tonnes and production at 1.38mn tonnes. In Q116, Chandra Asri Petrochemicals (CAP) was bringing its expanded facility back online, albeit with initial technical problems causing stoppages and low capacity utilisation. The expansion means production capacity of ethylene and propylene is expected to increase to 860,000 tonnes per annum (tpa) and 470,000tpa respectively, from 600,000tpa and 320,000tpa in 2015. CAP hopes the growth will lead to revenues rising by at least 30%, helping to sustain net profit at 4.7%.

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Indonesia is also ramping up propylene capacity. The Cilacap RFCC, which came into operation in Q415, added 180,000tpa of propylene capacity. With CAP needing only a further 10,000tpa of propylene to run its 480,000tpa PP plant at full operating capacity, Indonesia has made a major step towards propylene self-sufficiency, potentially with an exportable surplus. However, the economics may not stack up in setting up a new PP plant, which would need to be big enough to compete with regional rivals.

Pertamina has announced a USD13.8bn deal with Russia's Rosneft to jointly develop an oil refinery. According to the framework agreement, the refinery is likely to be built at Tuban, East Java and will have capacity of 300,000b/d of oil. Around 45% of the output will be used for the production of gasoline, 35% diesel and 20% petrochemicals, all for domestic consumption. The refinery is expected to be in commercial operation by 2022.

Taiwanese investors are looking to invest USD2.5bn in Indonesia to build ammonia and methanol plants. The first stage will see a 600,000tpa ammonia plant built while the second stage will see a 1.8mn tpa methanol plant constructed.

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