LG International Allocate US$13 Billion for Bintuni Indusrial Area

JAKARTA - LG International will allocate up to US$13 billion to build and operate a petrochemical complex in the Bintuni industrial area in West Papua, the South Korean conglomerate’s representative said.

Speaking to reporters following a meeting with Industry Minister MS Hidayat in Jakarta on Friday, LG senior executive Jee Hoon-Kang said the petrochemical plant would have the capacity to produce one billion tons of methanol a year.

However, he said LG would need a guarantee from the government to get enough supply of gas before starting the project.

“This is going to be a very good opportunity for us if we get gas allocation. With it, we can start to develop the [Bintuni] project with the Industry Ministry,” Kang told reporters.

Before the three-year construction of the facility commences, Kang said that the company would require at least one year for “deeper study”, to decide on the appropriate licensing and to locate natural gas supply.

The conversion of 2,300 hectares (ha) of conservation land for the Bintuni complex is currently awaiting approval from the Forestry Ministry.

During Friday’s meeting with the minister, Kang was informed about the plan to designate a 200 ha site as a shared facility for companies operating within Bintuni. “This is the first time we discussed the matter and I wish to discuss this with our partners [...] There are strong and weak points. [But] it is a good plan,” he said.

The ministry’s manufacturing industry director, Harjanto, who was present in the meeting, said the common facility would be shared by LG, German petrochemical company Ferrostaal Industrial Projects and state-owned fertilizer company PT Pupuk Indonesia in order to cut infrastructure costs.

“Building infrastructure is costly, so we see this as an opportunity for integration and optimization of investments among the companies,” Harjanto said.

“If everyone builds their own power plants, it would take up all the land. If one power plant is shared among companies, it will be more efficient. The idea is to integrate the petrochemical and fertilizer industries so their byproducts can also be shared among them.”

Responding to questions regarding Bintuni’s projected time frame, Harjanto said that it depended on the availability of gas.

“Genting Oil’s Kasowari well [in Papua] could be one of the sources for this industry. So once the natural gas is available, then the project will start,” he added.

To support its operations, Harjanto said that LG would need 91 million standard cubic feet per day (MMSCFD) of natural gas, which would bring the total gas consumption of Bintuni up to approximately 202 MMSCFD. There are about 48 trillion cubic feet of gas reserves that have already been identified in the area.

He also said that the ministry would soon be signing a memorandum of understanding (MoU) with LG that would clarify the terms of their partnership, including those related to gas allocation.

“This is a milestone in the partnership forged [with LG] for the development of the petrochemical industry in Bintuni,” he said.

The integrated petrochemical complex in Bintuni would produce urea and ammonia-based fertilizers and a wide array of petrochemical products, including methanol, polypropylene and polyethylene.

Bintuni is located near the Tangguh liquefied natural gas (LNG) field in West Papua, which is one of the biggest contributors in Indonesia’s overseas gas contracts. [TheJakartaPost]
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