Medco to invest $400m in eight bioethanol plants

Ika Krismantari, The Jakarta Post, Jakarta

The country's largest publicly traded oil company, PT Medco Energi Internasional, plans to build eight bioethanol plants over the next five years to meet the expected surge in the demand for biofuels both at home and overseas, the company's chief executive says.

Speaking on the sidelines of a biofuel seminar Thursday, Medco president director Hilmi Panigoro said that the company would spend about US$400 million on building the eight bioethanol plants, which would be capable of producing 10,000 barrels of oil equivalent per day (boed).

He said that the first of the plants was now under construction in Lampung, with a total investment of about $46 million.

"We hope the plant will start producing by December this year at an estimated initial production of 180,000 liters (about 1,132 boed)," Hilmi said.

Within the five-year timeframe, Hilmi said he expected Medco would build another seven plants with the same production capacities.

He also said the company would seek some 100,000 hectares of plantation land in West Java and Papua, adding to its existing 15,000 hectares in Lampung.

Hilmi said that the output of the new plants would mostly be exported, given the currently high prices for ethanol on the global market.

However, he said he had no objection to the government's proposal to oblige ethanol producers to sell their production on the domestic market.

"As long as the regulations are clear and do not harm our business," he said.

Previously, Evita H. Legowo, an assistant to the energy and mineral resources minister and also the first secretary of the National Biofuel Development Committee, told The Jakarta Post that the government planned to impose a domestic market obligation so as to secure biofuel supplies in the coming years.

Indonesia's demand for biofuel is expected to reach 5.29 million kiloliters by 2010, about 9.84 million kiloliters by 2015 and 22.26 million kiloliters by 2025.

Hilmi predicted that by 2025 there would be 371 biofuel plants, which would require a total investment of $17 billion.

Hilmi also said that Mitsubishi Corp., Japan's largest trading company, had agreed on the minimum amount it would pay for gas to be processed at its proposed US$700 million liquefied natural gas (LNG) plant in Senoro, Sulawesi.

Under the agreement, Mitsubishi would pay at least $3.85 per million British thermal units for the gas to be supplied from the Senoro and Matindok gas fields.

The Senoro field, in which Pertamina and Medco own equal stakes, has proven reserves of 1.4 trillion cubic feet of gas, while the nearby Matindok field, which is wholly controlled by Pertamina, has 700 billion cubic feet of proven reserves.

The plant will produce 2 million tons a year of LNG by the end of 2009, all of which will be exported to Japan.