NATURAL GAS DEVELOPMENT OPPORTUNITY FOR DOWNSTREAM INDUSTRY IN INDONESIA

Transcription

1 NATURAL GAS DEVELOPMENT OPPORTUNITY FOR DOWNSTREAM INDUSTRY IN INDONESIA Presented on The 4 th Gas Forum-IGS : Indonesia Gas Technology 2016 to evaluate Gas Technology issues and challenges and business opportunities relating to the Indonesia Gas Infrastructure. By Satriyo Nugroho Technical & Development Director PT. PUPUK KALIMANTAN TIMUR BNDCC, BALI. MONDAY, MAY 30,

2 Introduction From the point of view of the source of natural gas in Indonesia, the Indonesian petrochemical industry is less developed compare with the countries which limited natural gas reserves such as Thailand, Korea, and Japan. The Natural Gas is one of the potential resources to develop a large scale downstream Industries in Indonesia. 2

3 The Use of Natural Gas in Indonesia LNG 40.6% Industries (include Petrochemicals) 31.3% Natural Gas Energy/electricity 19.12% Other 8.9% Source : ESDM,

4 Downstream Industries of Natural Gas Urea NPK Melamine Ammonia Caprolactam Nylon Natural Gas Ammonium Nitrat NPK UAN exists in Indonesia Not exists in Indonesia Methanol Acetic acid Formaldehyde 4

5 Multiplier Effect from Natural Gas Downstream Industries The development of supporting industries The development of infrastructure & region For local communities The development of job opportunities The development of informal sector Increasing community development program Foreign exchange savings For Government Taxes and Dividen National food soverignty Program Increasing government revenue Company s Profit For Company The development of downstream industries Transfer of technology 5

6 Evaluation of Value Added LNG vs Downstream Industries No Aspect LNG Petrochemical 1 Workforce utilization low high 2 Foreign exchange Potential 3 Variety product sales from Indonesia low Raw material only high Various petrochemical downstream products 4 Economic Growth normal Able to grow continously and sustainable 6

7 Evaluation of Value Added LNG vs Downstream Industries Value Added Comodity Production Gas consumption International Price FOB Bontang Revenue USD/Tahun LNG 428 MMSCFD 5.4 USD/MMBTU 770,640,156 Gas Downstream Product Ammonia Ammonia 1,134,210 MTPY 116 MMSCFD 350 USD/Ton 396,973,500 Ammonia downstream Urea 3,432,000 MTPY 247 MMSCFD 215 USD/Ton 737,880,000 Ammonium Nitrate 330,000 MTPY 15 MMSCFD 400 USD/Ton 132,000,000 Methanol 495,000 MTPY 50 MMSCFD 255 USD/Ton 126,225,000 Total 4,257,000 MTPY 428 MMSCFD 1,393,078,500 Downstream industry in Bontang Source : Argus LNG daily- Jan 2016 & ICIS

8 Evaluation of Value Added LNG vs Downstream Industries Direct Employees used in the Operational Condition Natural Gas-based Industry has given contribution for employees absorption on its downstream industry such as ammonia, methanol, ammonium nitrate, urea, etc No Company Direct Labour ( Person) A LNG Industry * 990 B Petrochemicals Industry ** 1 Ammonia and Urea Plant (PKT) 1,800 2 Methanol Plant (KMI) Ammonium Nitrate Plant (KNI) 150 Total of Downstream Industry 2,130 Sources: * LNG Badak Bontang ** downstream Industriy- Bontang 8

9 Condition of Natural Gas for Downstream Industries in the World 1. China has played pricing strategy to control the market. Such pricing strategy is relatively cheaper in order to pressure the international market that causing some petrochemical industries in overseas become uncompetitive and threatening downstream business, among others : Caprolactam Plant : Capro - Korea (from 3 plants to 1 plant which is avaliable for operational), Capro Japan : Ube (2014) and Sumitomo (2015). Melamine Plant : Nissan & Mitsubishi-Japan, Samsung & Namhae-Korea, DKM Bontang & Sri Melamine Rejeki - Palembang. 2. In Q1 2016, around tons Urea Fertilizer product from China had entered into Indonesian market. 9

10 China Historical Urea Export Volume 10

11 International Supply & Demand of Melamine Tonnes World Demand Years Melamine capacity of China 11

12 Condition of Natural Gas for Downstream Industries in Indonesia The Natural Gas Price for the fertilizer industries in Indonesia is around 6 USD / MMBTU, relatively higher compared to the International Gas Prices, for example the natural gas price in Malaysia is about 4 USD / MMBTU. The Natural Gas Price is the largest component in the Cost Production of Urea Fertilizer which is around 70-75%. The Natural Gas Price and the energy consumption are the most dominant factor in Fertilizer Industry to be competitive. 12

13 Urea Production Cost Comparison: Domestic Vs China in Q Description Price (USD/Ton) Average Urea Production Cost in Indonesia > 215 Urea FOB China 210 Urea FOB Bontang

14 International Gas Price Source : Fertecon 2015, Dec 14

15 Ammonia Urea Historical Price USD/Ton Urea - Fertilizer Granular FOB Asia SE USD/tonne Periods Ammonia - Fertilizer CFR Taiwan USD/tonne Source : ICIS 15

16 Conclusion In order to support the Fertilizer and Petrochemical Industry in Indonesia to be more competitive, it should be supported by gas availability with the competitive price (maximum 5 USD/MMBTU). Development of Natural gas downstream industries will provide greater value added compared to selling the gas directly. Downstream industries which are based on natural gas will be able to provide a large multiplier effect on the national economics, such as employment and encouraging the other supporting industries growth. 16

17 THANK YOU 17