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erman petrochemical company Ferrostaal Industrial Projects GmbH and Jakarta-listed PT Chandra Asri Petrochemical have agreed to work on studies for the development of a petrochemical plant.

Under an agreement signed on Thursday, Ferrostaal and Chandra Asri will develop a methanol-based olefin production complex in Teluk Bintuni in West Papua, with a total investment amounting to US$1.89 billion.

The complex is expected to produce up to 400,000 tons of polypropylene and 175,000 tons of ethylene annually.

However, the project is dependant on feasibility studies as well as gas allocation and prices from the Energy and Mineral Resources Ministry.

Ferrostaal and Chandra Asri will cooperate with the Industry Ministry on the feasibility studies.

'€œWe are still on the agreement on feasibility studies. [What comes next] will depend on whether we will get the gas allocation,'€ Chandra Asri president director Erwin Ciputra said after the agreement signing at the Industry Ministry.

Gas supply for the complex is expected to be provided by the Tangguh liquefied natural gas (LNG) plant also in West Papua.

Both Ferrostaal and Chandra Asri have not determined the allocation of their relative share-holdings in the putative joint venture that would work on the planned project.

Ferrostaal senior executive manager for petrochemical development Asia Pacific Soenke Gloede said there would be preparation procedures following the feasibility studies '€” if successful '€” before the project kicked off.

'€œThe detailed schedule will now be worked out together with our partner,'€ Gloede said. '€œA factory complex like this may require three years of construction.'€

The production complex is expected to be ready for operation by 2019.

Petrochemicals is one of the country'€™s focuses in terms of industrial development. The development of this particular industry is expected to reduce imports of materials, such as propylene, ethylene, methanol, polypropylene and polyethylene from a number of countries, including neighboring Thailand and Singapore.

Figures from the Industry Ministry show that imports of petrochemical products reached $8.5 billion last year.

Industry Ministry director for manufacturing-based industry Panggah Susanto said the planned complex was in line with the government'€™s plan to develop eastern Indonesia.

Ferrostaal has previously built a methanol factory complex in Trinidad & Tobago with a production capacity of 4.1 million tons per year and another one in Oman with an annual capacity of 1 million tons.

Chandra Asri, Indonesia'€™s largest petrochemical company, expects to start operations at its butadiene plant in Cilegon, Banten, the first of its kind in the country, later this year.

In its latest move, Chandra Asri agreed with French tire maker Compagnie Financière Groupe Michelin to develop a $435 million synthetic rubber plant that is also expected to be built in Cilegon.

Chandra Asri recently terminated an agreement with state-owned energy firm PT Pertamina on their plan announced late last year to establish and operate a $200 million polypropylene factory in Balongan, Indramayu, West Java.

Shares in Chandra Asri, which trade on the Indonesia Stock Exchange under the code TPIA, were unchanged at Rp 2,700 (26 US cents) on Thursday.