Royal Dutch Shell, the world’s largest company based on revenue, on Tuesday started work on its first lubricants plant in Indonesia with a ceremony at the West Java site.
The plant will have the capacity to produce 120,000 tons a year of Shell’s lubricant products, making it the largest foreign-owned producer in Indonesia, according to Shell executive vice president Mark Gainsborough.
“We have an ambitious plan to grow our business here and this groundbreaking marks another milestone on our journey,” Gainsborough said on Tuesday.
The plant, which will be built in Bekasi, West Java, will be Shell’s sixth in Southeast Asia, joining similar plants in Malaysia, the Philippines, Singapore, Thailand and Vietnam.
Industry Minister M.S. Hidayat, who witnessed the ceremony, said the government welcomed Shell’s investment in what he called “a strategic industry.”
“Demand for lubricants will increase on the back of increasing sales of motor vehicles and growth in other industries,” he added. The minister said construction of the plant would cost $150 million to $200 million and would be completed within two years.
The lubricants to be produced at the plant are typically used for motor vehicles or machines.
“Currently there are around 200 lubricant producers across Indonesia, with production capacity of around 700,000 kiloliters a year, creating a market value of around Rp 7 trillion [$652 million],” Hidayat added.
Shell will compete against the market leader, state-owned energy firm Pertamina, which is projected to sell 680,000 kiloliters of lubricant products this year, representing a 10 percent increase on last year.
Royal Dutch Shell has been involved in Indonesia since 1880, when the country was a Dutch colony and an oil reserve was discovered in Sumatra, contributing to the company’s formation.
Its business in Indonesia mainly focuses on the downstream oil and gas industry through its lubricant products and commercial fuels.
Shell returned to the upstream business in Indonesia in 2011 when it acquired a 30 percent stake in the Abadi Liquified Natural Gas project in the Arufura Sea between the Maluku province’s Tanimbar Islands and Australia’s Northern Territory.
It now controls 35 percent of the project, which is tied to the development of an offshore gas block with 13 trillion cubic feet in reserves.
Shell also operates 79 gas refueling stations in Indonesia, spread out across cities including Jakarta, Bandung and Surabaya.
Foreign oil and gas companies operating in Indonesia include Chevron, Exxon Mobil, Total E&P, BP and ConocoPhillips.