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1. Pertamina studying naphtha supply for Chandra Asri. (Mines And Energy).

Indonesia is major oil producer but it has not been able to meet demand for naphtha, an oil derivative, from its upstream petrochemical industry like the olefin plant of Chandra Asri Petrochemical Center (CAPC). The problem is the absence of integration between CAPC and Pertamina, then state-owned oil and gas company, which is the authority in oil sector.

Other Asian countries and Middle East have no problem as faced by Indonesia in naphtha supply. South Korea, which is major net importer of oil, could even supply 30% of its naphtha requirement from its oil refineries.

The Cilacap paraxylene plant needs around 590,000 tons of naphtha a year. Its naphtha requirement is supplied by Pertamina from its oil refineries which processed several types of crude including Minas, Duff, Handil, Walio and Badak.

In a bid to improve its competitiveness, CAPC which started operation in 1995, is seeking cooperation with Pertamina in the procurement of naphtha. Naphtha accounts for 48% of the production capacity of its products. Naphtha price developments, therefore will have effects on the production cost of its petrochemical products.

The involvement of IBRA as a new shareholder is expected to strengthen the position of CAPC in bargaining with Pertamina in seeking contract on naphtha supply. IBRA is concerned with improving the performance of the petrochemical giant after the restructuring of its US$ 1.3 billion debt. IBRA became a 25.86% shareholder through the conversion of a debt of US$ 417 million into share. With the conversion of the debt CAPC still has a debt of US$ 100 million to IBRA. CAPC also still has debt to Japanese creditors including US$ 584 million to JIPIC and 4.85 billion yens to Toyo Engineering. The old owner Prajogo Pangestu through IPIC is a 49.55% owner of CAPC with an option to buy 4% of IBRA shares.

However, Pertamina is prepared only to supply naphtha for short term. In the past Pertamina supplied naphtha to CAPC only when it had surplus. In long term naphtha is expected to come form Trans Pacific Petrochemical Indotama (TPPI) in Tuban which is integrated with an oil refinery.

TPPI is now 65% completed and around US$ 400 million are still needed to complete the project. ANZ Bank, Singapore is to raise the fund and Beyond Petroleum has agreed to provide support and guarantee under an arrangement that BP will be the offiaker for certain products via Pertamina, which has a 15% stake in the project.

CAPC has imported most of its naphtha requirement through Marubeni Corp.. Most or around 80% of the feedstock is supplied from Middle East from spot market at a price of US$ 200 million a year. Other countries in southeast Asia supply 18% and Pertamina 2%.

Pertamina could not supply more as it uses its naphtha to produce oil fuel and to feeds its paraxylene plant. In addition it is bound by contract to export part of its naphtha production. Pertamina produces naphtha from its refineries in Cilacap, Musi, Plaju, Balongan and Balikpapan. It also produces naphtha from other refineries but not up to standards required by CAPC.

Naphtha produced by Pertamina has hydrocarbon element with a paraffin content of 30%. The type of naphtha needed by CAPC has a paraffin content of no more than 3%. Additional investment, therefore is needed for a facility to reduce the paraffin content. The industry and trade ministry and the energy and mineral resource ministry have set up a team to study the possibility of Pertamina supplying naphtha for CAPC. Supply is especially expected to the Cilacap refinery which produces naphtha, so far processed into oil fuel, benzene and paraxylene.

Altogether, imports of feedstock both for oil fuel by Pertamina and petrochemical industries total at least 2.68 million tons a year not including imports of feedstock for ethylene and propylene. Most of imports of refined products are made by Pertamina and CAPC as the off-takers.

Naphtha production

Most of naphtha produced by Pertamina is not up to the specifications of feedstock needed by CAPC. The Cilacap refinery is the largest producer of naphtha, accounting for 54% of 16.6 million barrels of the country's naphtha production in 2000. The second largest producer is the Balikpapan refinery in East Kalimantan, followed by Pangkalan Brandan, Dumai, Musi and Kasim refineries. The Dumai refinery also produces light naphtha totaling 489,600 barrels in 2000.

Altogether, the country's production of that material fluctuated in 1997-2000 period as shown in the following table.

Naphtha exports by countries of destination

Pertamina exports parts of its naphtha production under long term contract with buyers abroad and when there is surplus in domestic supply. In the first six months of 2001, Japan is the largest buyer of naphtha from Indonesia. Exports to that country totaled 2.5 million barrels that year, followed by Singapore and Taiwan.
Imports of refined oil products by off-takers

Type of product Volume Offtakers

HOMC 335,000 Pertamina
Kerosene 1,100,000 Pertamina
Diesel 189,000 Pertamina
Light Naphtha 1,065,000 Pertamina & CAPC
Total 2,689,000

Source: Data Consult
Naphtha production of Pertamina, 1997-2001 *)

 ('000 Barrels)

Refineris 1997 1998 1999 2000 2001 *)

P. Brandan 242.2 70.7 614.7 667.1 --
Cilacap 3,035.7 2,305.7 4,998.1 9,023.6 --
Balikpapan 4,475.6 3,359.0 3,058.8 6,172.5 --
Musi 36.7 87.3 95.3 135.7 --
Dumai 396.6 227.5 399.5 620.2 --
S. Pakning -- -- -- -- --
Kasim -- -- 40.7 28.2 --
Total 8,113.4 6,050.4 9,207.1 16,647 6,517
Light Naphtha:
Dumai -- 439.7 458.8 489.6

*) January-May

Source: Directorate General Oil and Gas/Data Consult
Exports of naphtha by countries of destination, 1997-2001

 (000 barrels/US$ million)

Country of 1997 1998 1999 2000 2001 *)

Japan 4,774.7 2,534.5 2,728.5 4,392.6 2,515.9
 101.8 37.2 56.5
South Korea -- 465.8 388.2 805.4 241.2
 7.4 7.7
Singapore 1,239 2,048.4 3,840.7 3,814.8 1,803.6
 25.9 28.6 68.0
Taiwan -- -- 220,1 959,4 1.157,7
Malaysia -- -- -- 817,2 598,7
Thailand 547,5 934,6 982,8 139,6 199,9
 11,1 14,7 17,2
India -- -- -- 260,3 --
Others -- -- -- 200,6 --
Total 6.561,2 5.983,3 8.160,3 11.390,1 6.517,2
 138,8 87,9 152,9

Source: Directorate General Oil and Gas/Data Consult
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Comment:1. Pertamina studying naphtha supply for Chandra Asri. (Mines And Energy).
Publication:Indonesian Commercial Newsletter
Article Type:Statistical Data Included
Geographic Code:9INDO
Date:Aug 13, 2002
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