Indonesia has begun construction of a coal gasification project in East Kalimantan that aims to produce about 1.3 million tonnes of methanol annually, potentially saving up to 7.1 trillion rupiah ($401.02 million) in foreign exchange annually by reducing import dependence, local media reported on August 31.

The project, located in the Batuta Chemical Industrial Park in Bengalon district, is being developed by PT Bumi Etam Chemical (BEC), a joint venture between PT Arutmin Indonesia and PT Kaltim Prima Coal. It will process 7.70-7.78 million tonnes of coal with a calorific value of 3,300-3,400 kcal/kg annually into methanol meeting International Methanol Producers and Consumers Association Grade standards.

Deputy Energy Minister Yuliot Tanjung said the project is part of the government's downstreaming agenda to increase added value of natural resources, reduce dependence on imports and support energy security. He said it should serve as an example for other coal companies given the large potential for low-CV coal in Kalimantan and Sumatra.

The facility will cover about 943 hectares and include gasification units, synthesis reactors, power plants, water treatment and port terminals. The technology is designed to control emissions and will be integrated with carbon capture and storage.

BEC President Director Rio Supin said the company has completed front-end engineering design and signed an engineering, procurement, construction and commissioning framework agreement with PT Istana Karang Laut and China National Chemical Engineering Co. It is targeting commissioning by 2029.

Methanol produced will be directed toward petrochemical and formaldehyde industries, and will support the fatty acid methyl ester and B50 biodiesel programs. The government expects the project to create jobs, spur supporting industries and boost economic activity in the region.