Calculating the future of petrochemical industry in Aceh

Following is a summary based on an article by Yosef Ardi, published by Jakarta-based business daily Bisnis Indonesia on July 27, 2001

The future of petrochemical industry development in Aceh would very much depend on the supplies of natural gas, which tend to deplete in the coming years, and also the number of natural gas consumers, which tends to increase in the coming years.

The recent stoppage of natural gas supplies from ExxonMobil Oil Indonesia, that had halted its gas operation in North Aceh since March, had just proved that. Many petrochemical industries had been affected by the stoppage.

The most affected one must have been PT Arun Natural Gas Liquefaction (Arun NGL) that produces liquefied natural gas (LNG), two fertilizer companies PT Pupuk Iskandar Muda (PIM) and PT Asean Aceh Fertilizer (AAF), hydrogen peroxide plant belonging to AAF and also aromatic center owned by PT Humpuss Aromatik.

The losses from the stoppage of gas supplies to those LNG plant and petrochemical companies are so massive, that it raised doubt about the future of petrochemical industry in the restive province.

Although ExxonMobil has recently resumed its operation, there are still worries as the company could stop its operation any time, considering unstable security situation in the province.

Besides, there is a question of gas reserves in the province, whether the amount of gas reserves would be enough to support a sustainable development of petrochemical industry in the province. Many believe that gas reserves in Aceh currently total around 7 to 11 trillion cubic feet (TCF).

Most of the natural gas, of course, will continue to be consumed by Arun NGL, which currently has six LNG liquefaction trains. If all those trains are in operational, it would consume a total of 2.1 billion cubic feet per day.

In addition, PIM and AAF each consumes around 55 to 60 million standard cubic feet per day (MMSCFD) of natural gas, thus, the two fertilizer plants would consume between 110 to 120 MMSCFD.

If Arun NGL and the two fertilizer companies are operating fully, gas reserves in Aceh would finish in the next 10 to 15 years.

That assumption exclude natural gas consumption by other petrochemical companies in Aceh, that of course also need continuous supplies of natural gas. PT Humpuss Aromatik, for instance, is currently only operating its fuel refinery plant. It is not clear if the company would build other aromatic plants in its complex.

In addition, PIM is currently building its second fertilizer factory, named PIM-2, which will need a total investment of US$310 million. When it is ready, the plant needs daily consumption of 60 MMSCFD of natural gas in the next 25 years.

Again, this raises the doubt about the supplies of natural gas for all those petrochemical industries in Aceh.

Because of this, the government -- as the owner of all fertilizer companies in the country -- has planned to relocate the PIM-2 fertilizer plant to Palembang, South Sumatra, where natural gas supplies are still abundant, and most importantly, the security situation is more stable.

The plan to relocate the plant has actually been welcomed by its main creditor JBIC of Japan (formerly Japan Exim Bank).

However, because of the outcry of the Acehnese who rejected the relocation of PIM-2, the government canceled its plan to relocate the fertilizer plant, and decided to continue the development of the plant in Aceh. The plant is slated to be ready by 2003.

Nevertheless, there is a heartening news from state oil and gas company Pertamina, that plans to relocate two LNG trains from Arun to its new LNG project in Tangguh, Irian Jaya.

If the relocation of the two LNG trains is materialized, it would help a lot the petrochemical industry in Aceh. The relocation of the two trains would save 255 billion standard cubic feet of natural gas per annum - or equal with the consumption of the two fertilizer companies in Aceh for 13 years in operation.

Thus, if the relocation plan can be materialized in the next two years, it will save around 2.5 trillion cubic feet of natural gas, and this amount would be enough to maintain the operation of PIM-2 fertilizer plant and two existing fertilizer plants, and the possibility to encourage the development of petrochemical industries.

All these scenarios need deep scrutiny from the public, and most importantly, from the new government, under President Megawati Soekarnoputri and Vice President Hamzah Haz. A decision must be taken by the government, otherwise, Aceh's potency as one of the petrochemical industrial center will diminish. (*)