Qatari Oil Firm Eyes Chemicals Investment

Qatar-based Gulf Petroleum, part-owned by the Middle Eastern nation’s royal family, plans to establish a joint venture with a local company to construct a coal-based petrochemical plant in South Sumatra this year, officials from the two firms said late on Tuesday, although Gulf’s president acknowledged that the project still needed to win approval from its head office in Qatar. “In principal, both parties have agreed to join forces.

The total investment will be about $2 billion,” said Djan Faridz, the president director of Priamanaya Group, Gulf’s local partner, after a closed-door meeting on Tuesday with the Doha-based company at the Four Seasons Hotel in Jakarta. “We’re in the final stages before the signing of a memorandum of understanding with them. We hope that it’ll be this week,” Djan said. Gulf’s president, Abdul Aziz H. al-Dulaimi, who left for Doha after the meeting, confirmed that the project would be developed on a joint-venture basis. But he said he still had to discuss the matter with his colleagues in Qatar. “If they agree, obviously we will sign the agreement,” he said.

The announcement comes after reports on Monday said that Gulf and Priamanaya planned to build a separate coal gasification plant in Lahat, South Sumatra, at a cost of some $1 billion. If the proposed projects go forward, Gulf will become the third major firm from the oil and gas-rich state to set up shop in Indonesia, following in the footsteps of Qatar Telecom, which acquired a 65 percent stake last year in the country’s second-biggest telecommunications operator, PT Indosat Qatar Islamic Bank has also established a local presence and is in talks with state-owned PT Bank Negara Indonesia about setting up a new Shariah bank.

Qatar Holdings, the direct investment arm of the Qatar Investment Authority, says it plans to establish a wholly owned investment firm in Indonesia by the end of the year, with up to $1 billion available for local projects. Priamanaya’s Djan said the joint-venture company would likely be established in the fourth quarter so as to allow the plant to be completed in 2011. He said that Gulf would be the majority shareholder, but declined to elaborate further. “The plant will be located in Patra Tani in South Sumatra,” Djan said, adding that the coal to feed the plant, which is to produce products similar to ethylene and polyethylene, would come from Priamanaya’s mines in Prabumulih and Muara Enim. Priamanaya Group is a holding company for a number of firms that are primarily focused on power plant construction and operations. One of their current projects is building the coal-fired Rembang power plant in Central Java.

Alwi Shihab, the president’s special envoy to the Middle East, who was also present at the Jakarta meeting, said his role was to help steer the talks toward a successful conclusion. “Both sides have clearly arrived at an agreement,” Alwi said. “So there are only minor issues that need to be finalized before the project begins.” The petrochemical plant would be Gulf’s second foray into Indonesia. In 2007, the company took part in a $450 million tender for the construction and operation of a coal-fired power plant in Indragiri Hulu, Riau. That project, however, had to be put out to tender again this year because there were only two bidders.