Jakarta. President Joko "Jokowi" Widodo has presided over a groundbreaking event for a $2.3 billion downstream coal project in the Tanjung Enim Industrial Estate, South Sumatra, on Monday, kicking off the second-largest direct investment by an American company in Indonesia in the past year.
The country expected the project would help it cut its dependency on expensive fuel imports.
Air Products and Chemicals, the American multinational industrial gases and chemicals manufacturer, worked with state-controlled coal miner Bukit Asam and state-owned energy company Pertamina to build a plant that turns coal into dimethyl ether (DME). The government hoped the gas fuel that t could replace the liquified petroleum gas (LPG) in the kitchens across the country.
Minister of Investment and Head of the Investment Coordinating Board (BKPM) Bahlil Lahadalia said the plant would require a total investment of Rp 33 trillion ($2.3 billion) and about 30 months for construction.
"This is quite a big investment. This is the second-largest investment from the United States after Freeport," Bahlil said during an event on Monday. He referred to Freeport Indonesia's $2.9 billion investment in a copper smelter in East Java, expected to start constructing this year. Freeport McMoran controls 48.8 percent in Freeport Indonesia, while the Indonesian government controls the remainder.
"This is fully direct investment from the United States. It is not from South Korea, Japan, or China. This also dispels the notion that we only focus on [attracting investment] from only one country," Bahlil said.
Bahlil said the coal-to-DME project would generate 12,000 to 13,000 direct jobs during its construction phase, carried out by Air Products and Chemicals. The project would also add 11,000 to 12,000 jobs in Pertamina's downstream facilities.
"For non-direct jobs, the project involves many contractors and subcontractors. It can have three to four times multiplying effect," Bahlil said.
"In addition, once there is production, there will be 3,000 permanent jobs in the coal to the DME project.
President Jokowi said he was elated by the plant groundbreaking, waiting for about six years for the downstream coal project to start finally.
Turning coal into DME, said the President, would reduce LPG imports and ease the burden on the state budget. In addition, it creates new jobs and improves the trade balance.
"Our imports of LPG are large, maybe Rp 80 trillion from our total demand of Rp 100 trillion [a year]. That must be subsidized for the public because the price is already very high. The subsidies are around Rp 60-70 trillion," Jokowi.
The Minister of State-Owned Enterprises Erick Thohir said the coal-to-DME project was a national strategic project. This status ensures the project would enjoy the government's various incentives such as tax breaks or expedited permit process.
Erick said Air Products and Chemicals invested $ 2.1 billion in the project. With the utilization of six million tons of coal per year, Erick said, this project can produce 1.4 million DME per year to reduce LPG imports by one million tons per year.
Indonesia is the world's largest coal exporter, shipping around 400 million tons abroad every year. The southeast Asian country sits on top of about xx billion coal reserves, the 11th largest in the world, according to data compiled by Worldometer.