What Is the Petrochemical Industry in Indonesia & Its Growth

The petrochemical industry is a global economic support because it produces raw materials for many sectors, such as textiles, pharmacy, papers, and many more.

This industry processes petroleum and natural gas to industrial raw materials through complex processes. To get to know more about this industry, read the explanations below!

What Is the Petrochemical Industry

The petrochemical industry is a sector producing raw materials from petroleum, natural gas, coal, and biomass. This industry is also among the organic chemical industry with hydrocarbons as the base materials. Hydrocarbon is derived from processing petroleum, natural gas, coals, and biomass.

In general, the petrochemical industry produces basic chemicals, like ethylene, which is later utilized by other industries for manufacturing other materials or products.

The petrochemical industry uses three basic materials to produce final products, such as olefin, synthetic gas, and aromatics. The manufacturing process includes:

Converting petroleum and natural gas into petrochemical raw materials.
Transforming raw materials into intermediate products.
Altering intermediate products into final products.

Petrochemical products can be processed into thousands of consumer and industrial products, such as rubbers, paints, plastics, synthetic materials, textiles, soaps, and many more.

Because it provides raw materials for many industries, this sector can be regarded as one of the "backbones" of the world economy and industry.

According to Statista, in 2023, this industry had reached a total production capacity of 2.4 billion metric tons. In 2030, the global market value is predicted to reach more than USD 1 trillion.

The Structures of the Petrochemical Industry

The petrochemical industry has three main structures in market stages before it is finally distributed widely. Below is the complete explanation:

1. The Upstream Stage

The upstream stage in the petrochemical industry refers to the exploration and production of petroleum and natural gas. This stage is the first process done to find the proper and economical petroleum sources.

In general, the exploration process, including drilling, is carried out offshore and onshore with in-depth surveys of the geophysics and geological conditions.

2. The Midstream Stage

Once the factory has found the petroleum or natural gas sources in the upstream stage, this industry will store it until it is ready to be distributed through pipelines, tanker trucks, and so on.

Some petrochemical companies may also produce other petroleum products, like liquified natural gas, by using the elements in upstream and midstream stages.

3. The Downstream Stage

This stage is the last step of the petrochemical industry. The downstream stage focuses on transforming petroleum and natural gas to be the final products.

This phase also distributes and sells petrochemical products. Otherwise, an important part of the downstream market stage is refining, processing, and purifying natural gas and petroleum.

When natural gas and petroleum are transported to refineries, these basic raw materials are converted into industrial and consumer goods like diesel, kerosene, lubricants, and so forth.

The Products of the Petrochemical Industry

The petrochemical industry processes petroleum and natural gas into chemical products for various purposes. Below are some examples of products from the petrochemical industry:

1. Olefin

Olefin is usually found in polypropylene and is used in the plastic industry to produce plastic containers, plastic bags, and others.

2. Agrochemicals

Agrochemicals is a petrochemical product with several variants, such as TB-192 and Tenac Sticker. TB-192 works to cover the scratch in the rubber tree and Tenac Sticker works to stick the pesticide mixture.

3. Aromatics

Aromatics are petrochemical products used to produce plastics, nylon, detergent, cosmetics, and many more. Examples of aromatics are paraxylene and benzene.

4. Bitumen

Bitumen is a chemical used to create asphalt which is later utilized to coat dams and roads, as well as become a brisket mixture.

5. Petroleum Coke

Petroleum coke is a chemical used to melt tin and aluminum. Besides, it has low ash and high carbon, making it suitable for iron smelting and cement production.

The Petrochemical Industry in Indonesia

The petrochemical industry is one of the three largest industries that supports non-oil and gas processing performance and drives economic growth in Indonesia. In fact, the Ministry of Industry has made it a priority in the 4.0 industrial program.

This industry has also become the foundation of the national industry regulated in the Government Law Number 14 of 2015. Not only the petrochemical industry but also the chemical industry has become the government’s priority.

To make sure that the petrochemical industry remains stable and strategic, the Indonesian Government has also done some initiatives, one of them is supporting the collaboration between PT Chandra Asri Petrochemical Tbk and the subsidiary of PT Pertamina (Persero), PT Kilang Pertamina Internasional.

Both companies had signed the Head of Agreement as a form of cooperation in developing the petrochemical business in Indonesia.

This collaboration is expected to increase national downstream petrochemical business opportunities following the direction of the 7th President Joko Widodo who encouraged the construction of factories with petrochemical import substitution.

In addition to the strategy, the Indonesian Government also gives fiscal incentives, additional support via Program Peningkatan Produksi Dalam Negeri (P3DN), and the implementation of SNI and SKKNI.

Those are the information about the petrochemical industry you can learn. This industry is one of the important sectors in Indonesia and a global market that can elevate the economy.

As a leading chemical solution company in Southeast Asia, Chandra Asri Group offers high-quality chemical products processed by reliable operation, professional teams, and efficient storage facilities. Thus, make sure to use chemical materials from the Chandra Asri Group for your needs!