Indonesia petchems face slow recovery

06 June 2008 06:27  [Source: ICIS news]

By Steve Tan

SINGAPORE (ICIS news)--Indonesia’s petrochemicals sector is on the mend after suffering a recent spate of power outages, but the recovery is expected to be slow due to the ongoing shortage of electricity supply, local producers said on Friday.

Most producers in the main industrial belt of Merak, Anyer and Cilegon in western Java had been forced to shut down or reduce operating rates last week, as state utilities Perusahaan Listrik Negara (PLN) started rationing power, market sources said. 

"We have had to shut off electricity in turns and there is still a potential of a blackout anytime," said a company source with integrated vinyls maker Sulfindo Adiusaha. The company has started to ramp up production at its ethylene dichloride (EDC) and caustic soda plants after suffering a power outage last week, but both its vinyl chloride monomer (VCM) and downstream polyvinyl chloride (PVC) plants remain shut.

Most petchem producers were still lamenting the lack of steady supply and had not been able to restore full production rates.

"Our production stopped twice this week with each stoppage lasting 7-8 hours. This has reduced our production from 100% last week to 75% this week. The local authorities have declared a reduction of 20% in power output and the electricity is supplied on a rotational basis to the various areas. The measure has been attributed to the recent hike in fuel prices and the problem can only be solved in 2010 when new power stations are built," said a company source with Polychem, a monoethylene glycols maker (MEG).

Ethyl acetate producer Showa Denko restarted its 50,000 tonne/year ethyl acetate plant on Wednesday but said production may stop again as they anticipated further power supply interruptions.  

Other plants affected by the power outages include polypropylene (PP) maker Tripolyta located in Cilegon, which has started to ramp up production back to 70% following massive production cuts last week. 

Styrindo Mono, Indonesia’s sole styrene monomer maker has only kept its larger 250,000 tonne/year line running due to the lack of certainty about the availability of power supply.

PLN had been giving daily updates to producers in the affected areas on the availability of power supply, but had been unable to guarantee uninterrupted supply due to severe shortages of diesel fuel, which power generation plants rely upon.

Sky-high international crude prices coupled with the shortage of diesel fuel, attributed to a surge in Chinese demand, have made it difficult for Indonesia to source adequate supplies, especially of diesel, which is subsidised in the domestic market.

The majority of Indonesia's electricity generation is currently fuelled by oil, but efforts were under way to shift generation to lower-cost coal and gas-powered facilities, market sources said.

Some companies were considering alternative power sources such as coal, of which Indonesia has abundant supply.

"Our company has its own power generators but they run on diesel so to use them would cost us quite a lot. We’re thinking of buying some coal-fired generators to help tide us over in the future," said a company source with Polychem.

Other plants such as cracker operator Chandra Asri have turbine and steam generators to cater for their utilities in the event of a power outage. Vinyls maker Asahimas was also largely unaffected due to an ongoing maintenance shutdown. 

Hong Chu Hui, Helen Lee, Brian Myung and Chow Bee Lin contributed to this story

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By: Steve Tan
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