Revitalization of sugar and fertilizer factories to total: Rp 70.6 trillion

The government’s five-year program to revitalize the country’s inefficient fertilizer and sugar industries will cost up to Rp 70.6 trillion (US$8 billion), says the industry minister.

“The majority of the budget or Rp 47.1 trillion will be used to finance the revitalization of the fertilizer industry, while the rest will be allocated to the sugar industry,” Industry Minister M.S. Hidayat said Monday.

The revitalization of urea factories alone will require Rp 45.2 trillion, while NPK fertilizer factories will need Rp 1.9 trillion, Hidayat said.

Urea, which is produced through a two-step chemical reaction, is made from ammonia and carbon dioxide, which are both fed into a reactor at a high pressure and temperature, while NPK contains three chemical materials; nitrogen, phosphorous and potassium (NPK).

Hidayat said the revitalization of the country’s existing fertilizer factories was necessary in order to cope with rising demand.

“The technology used in existing fertilizer factories is outdated and no longer efficient,” he said, adding the government had estimated that fertilizer production from those factories would not be sufficient to fulfill future demand in the country.

Domestic fertilizer consumption currently totals 11 million tons a year.

The government estimates that in 2025, Indonesia will need about 23.2 million tons of fertilizer.
Last year, fertilizer factories produced 6.8 million tons of urea and 1.5 million tons of NPK.

Based on a meeting held in January, the government plans to revitalize the fertilizer industry by providing additional capital to state fertilizer producers, restructuring six urea factories, constructing four new organic fertilizer factories and ensuring sufficient supplies for the factories.

The shortage of gas, for example, has caused serious problems for the country’s fertilizer production.

Existing fertilizer factories require 783 million standard cubic feet of gas per day (MMSCFD). With the revitalization, the gas needed will increase by 509 MMSCFD.

Hidayat said the ministry had succeeded in negotiating gas supplies over the next decade, from Total E&P, Pearl Oil and Inpex, for 80 MMSCFD for the newly opened PT Pupuk Kaltim plant.

The ministry also issued a regulation stipulating a road map of cluster expansion on the sugar cane industry on Jan. 27 to strengthen the program.

“The forestry minister has informed us there are about 500,000 hectares of conversion and abandoned forest that are ready to be converted into sugar cane plantations,” Hidayat said.

The vacant lands are in South Sulawesi, Lampung, Jambi and Papua.

“We will ask for some assistance from the agriculture ministry to determine whether the area is fit for sugar cane plantations,” he said.

Hidayat said the demand for raw sugar for industrial use reached 2.15 million tons in 2009, while domestic production was only 1.9 million tons.

He added that demand for raw sugar for industrial use would reach 2.74 million tons by 2014.

Indonesia is the largest sugar buyer in Southeast Asia, with a total domestic demand (household and industrial) of 4.8 million tons per year.