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PTTGC, Pertamina move to next level of collaboration on petrochem complex

Pertamina and PTT Global Chemical (PTTGC) have inked a heads-of agreement on a manufacturing joint venture with a view to pursuing a final investment decision on a world-scale petrochemical complex in Indonesia, which is targeted for commercial operation by 2018.

They made the announcement of the signing in Jakarta yesterday.

Pertamina, the Indonesian national energy company, and PTTGC, Thailand's leading petrochemical producer, have advanced their partnership and collaboration by entering into the manufacturing JV heads-of agreement (HOA) to proceed further with the feasibility study of the complex. An HOA is a non-binding document outlining the main issues relevant to a tentative agreement.

The move comes after the completion of an extensive project preliminary feasibility study - a part of the partnership HOA signed in April.

The manufacturing JV-HOA is aimed at further materialising the agreed joint-venture principles and investment scope, as well as enabling both parties to finalise the project details by early next year, before conducting a detailed bankable feasibility study and front-end engineering design.

The parties have reached understanding on the project's definition, including a common goal and objective, a competitive investment model and appropriate site specification, as well as each party's strength to be leveraged for building the JV's competitiveness.

This will move the matter forward for a final investment decision, which is anticipated in 2015.

In addition, an exhaustive survey of Indonesia's polymer market has been jointly conducted through the distribution and marketing activities of both parties, where the initial complex configuration has been defined and technical study of such investment scope has been assessed.

Meanwhile, domestic Indonesian demand for petrochemical products is expected to increase, because of the positive trend of the manufacturing sector.

The petrochemical market's value is expected to reach US$30 billion (Bt962 billion) by 2018 and the Pertamina-PTTGC manufacturing JV is targeting to control 30 per cent of the market after the complex commences commercial operations in 2018.

Currently, the production of petrochemicals in the country is still insufficient to meet downstream industry needs, creating imports to the tune of $5 billion per year.

Karen Agustiawan, president-director and chief executive of Pertamina, said the announcement of the signing was crucial proof of Pertamina's commitment to this high-priority collaboration and investment.

The project will represent a key milestone in the company's ambitious downstream petrochemical development strategy. Pertamina is, therefore, bringing the best potential investment conditions for further project feasibility study refinement, including the complex's location providing best economic competitiveness through refinery integration, feedstock security and supportive fundamental infrastructure, she said.

Bowon Vongsinudom, president and CEO of PTTGC, said: "Since the initial HOA signing on April 1 in Bangkok, we have been working together very hard on the preliminary study of the project. The complex will include a world-scale cracker and integrated downstream units, and - in the next stage - we shall focus on a further detailed assessment of greater value enhancement through various synergies and integration at the selected location to assure the complex economics and competitiveness.

"For PTTGC, this partnership is the right strategic ownership model with the right partner, designed to capture growth in the largest economic centre among AEC [Asean Economic Community] countries. PTTGC is bringing the industry knowledge, while Pertamina is providing a superior local access, and together this collaboration will deliver a promising achievement of this potential investment," he added.

Pertamina and PTTGC have targeted the project feasibility study refinement stage for conclusion by the second quarter of next year, to accelerate the implementation and meet the complex's start-up by 2018.

Together with the building block of the potential joint petrochemical complex investment, they will also enter into a marketing and trading joint venture to initially conduct both PTTGC's and Pertamina's polymer-products marketing and distribution throughout Indonesia in the near future.

Pertamina owns and operates five refineries throughout Indonesia. With a total capacity of about a million barrels of crude oil per day, it is ranked the fifth-largest in Asia.

In this regard, it has tremendous potential to integrate refinery and petrochemical business, hence adds more value to the natural resources of Indonesia. With these advantages, Pertamina is determined to be a major player in Indonesia as well as in the region.

PTTGC, as flagship of the PTT Group, has a combined chemical/petrochemical capacity of 8.72 million tonnes per year, and a crude oil/condensate distillation capacity of 280,000 barrels per day.

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