Short-term survival, long-term growthOctober 13, 2020
Yulian Dekri, president-director and CEO of Trans-Pacific Petrochemical Indotama (TPPI), talks to The Energy Year about how the company has addressed the Covid-19 crisis and the related drop in demand for downstream products. Majority-owned by Pertamina and Tuban Petro, TPPI plans on becoming the most comprehensive producer of petrochemicals in Indonesia.
Tell us how the Covid-19 crisis has affected your operational organisation so far.
As we know, Covid-19 could have an unprecedented impact on our personnel and our business. TPPI is prioritising the safety of our employees, and maintaining and continuing our business. TPPI is closely monitoring the situation with guidance from external, local and healthcare agencies.
In controlling Covid-19, TPPI is also following Covid-19 protocol. We are preparing our team to handle, anticipate and prevent Covid-19 in TPPI, especially in our plant in Tuban, East Java. In terms of specific preparation, we have organised masks and sanitiser, we measure temperatures when entering an office and plant, we have hazmat suits, etc. Also, we implement physical distancing and working from home, and we provide supplementary vitamins to our employees.
We also understood that this crisis would have an economic impact on the community. Before, TPPI has helped the community through community social responsibility programmes. We have two types of programmes, helping the nation and making food donations in the surrounding community and areas of Tuban and East Java.
The situation is very challenging, but I think if we want to control Covid-19, it depends not only on the government, but on the community and all of Indonesia. It is not just the government’s responsibility. If we want success, our government and our community must support each other.
Did you have to reduce your production profiles or change them in any way?
Yes. The virus has slowed down fuel and fuel products as well as aromatics and olefins demand growth in 2020. Covid-19 will put additional pressure on the industry. The oil prices decreased sharply in April until the crash of the WTI to negative USD 37, something that has never happened before. The reason is the market suddenly flooding with oil while facing limited storage. During the pandemic, demand decreased suddenly, including in Indonesia. The country’s demand for oil products in April decreased 30-40%. I think we are seeing the same situation with the price of aromatic products, for example paraxylene and benzene.
TPPI is part of the industry in Indonesia and is feeling the effects of the Covid-19 pandemic. Our plant currently still operates but with minimum to medium intake: We are taking only 60-70% of our normal intake. To compensate for the income reduction we must optimise our costs. We cut high-cost production and have arranged an optimised annual acting budget, cutting it by approximately 25%.
What is the biggest challenge for you? Is it getting access to feedstock or do you have other operational issues?
The biggest issue is our production. Because the demand decreased sharply, this means our revenue also decreased sharply, and that is our biggest challenge. In terms of our employees, they are okay and there are no problems.
You had a plan to increase aromatics production from 50,000 bpd to 55,000 bpd, a large plan to integrate the Tuban Petro units and a goal of having an olefins centre to increase production to 780,000 tonnes. Is this all going to be put on hold?
The short-term strategy is survival, but in the medium and long term we are still focused on our important projects. This is an important project, not just for TPPI but also for our government and community. The projects are still running.
I think that some behaviour may change, but aromatics are still in demand and will increase in the future. In general, I believe this segment is still new and relevant for us.
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