PETROCHEMICAL BUSINESS PROJECT FEASIBILITY STUDY (CASE STUDY: DME PLANT OF PT PUPUK KALIMANTAN TIMUR)

• Main Author: Rois, Achmad
• Format: Theses
• Language: Indonesia
• Subjects: Manajemen umum
• Online Access: https://digilib.itb.ac.id/gdl/view/36577
• Institution: Institut Teknologi Bandung

PT Pupuk Kalimantan Timur (PKT) is one of the subsidiaries of PT Pupuk Indonesia. As one of the fertilizer holding subsidiaries, PKT relies on its business revenue from the sale of urea fertilizers and ammonia. PKT has a capacity of urea fertilizer production of 2,98 million tons, ammonia 1,85 million tons and NPK 350 thousand tons. The main PKT income is supported by fertilizer production activities and sales. So far the PKT income is mostly from subsidy revenues, so if the plan of the Government of Indonesia (GOI) is to divert fertilizer subsidies directly to farmers, then the PKT’s income will certainly be corrected. In this era of digital technology, the development of precision agriculture has been so rapid that farmers can be directed as to which variety of crop use, exactly the best time to plant, how many seeds to sow, the right time to fertilize, and how much fertilizers to use. Consequently, the use of fertilizers is more targeted and effective, and can save fertilizers by as much as 15%. In addition to the emergence of precision agriculture, recently the use of biofertilizers has grown rapidly. Biofertilizers use certain microorganisms to take fertilizers directly from the air. This makes the use of fertilizers more effective, efficient and the fertilizer consumption is lower than before. To maintain the company’s business continuity from these threats, PKT has begun to develop a long-term strategy, one of which is the construction of a methanol and DME (dimethyl ether) plant. The strategy to build a methanol and DME plant are in line with the GOI’s plan to reduce LPG imports because natural gas production in Indonesia contains lean C3 and C4 as LPG raw materials. In the national energy general plan (RUEN 2017) the GOI sets DME usage at 1 million tons by 2025. Methanol is the raw material for making DME which can be made from C1 (natural gas). Low LPG production causes the GOI to import LPG by as much as 70% of domestic needs, The high import cause the oil and gas trade balance in 2018 to have a deficit of US$ -12.403,80 million. To prevent an increase in LPG imports, the GOI must accelerate the use of DME as an LPG mixture. To date, there is only one DME plant in Indonesia and it is located in Tangerang with a capacity of 12,000 tons per year. With the GOI plan to use DME of 1 million tons and to reduce oil and gas imports, another DME plant must be built in Indonesia. PKT must take advantage of this window of opportunity. PKT has the advantage of being experienced in operating large capacity ammonia plants, and this is not easily imitated by competitors. Combined with qualified human resources, PKT has mastered the natural gas-based petrochemical industry. Another advantage of PKT is its strategic location for developing the petrochemical industry because Bontang has been designated as C1 or natural gas-based petrochemical industry cluster. With the support of infrastructure in the form of natural gas piping networks, ports and adequate public facilities, PKT has advantages that cannot be replicated elsewhere. Bontang, a city in East Kalimantan, is in the center of the Indonesian archipelago and is in close proximity to both the western and eastern parts of the country. This study conducts an economic feasibility analysis for a DME plant with a capacity of 150.000 tons per year. The measurements used are Payback Period, Discounted Payback Period, Net Present Value, Internal Rate of Return, and Profitability Index. In addition, a sensitivity analysis as well as a risk analysis will be carried out. The DME project is financially feasible by computing the financial feasibility parameters such as NPV>0, IRR> cost of capital, and profitability index>1. The feasibility study result is NPV of US$ 6,963,194 IRR of 13.28% greater than WACC of 10.27% and greater than that required by PT Pupuk Indonesia at 11.50%, and profitability index = 1.30. The project has a payback period of 6.52 years, and a discounted payback period of 11.22 years. After the result of the financial analysis are obtained, then sensitivity analysis is carried out to determine the characteristics of the project feasibility on changes in raw material prices, investment values and product selling prices. A risk management analysis has also been carried out to assess the project’s risk.