Shell Eyes Expansion, Optimistic for Indonesian Growth
Multinational oil and gas company Royal Dutch Shell remains bullish in Indonesia, despite sluggish growth, as the company eyes expansions, a senior official said.
"We've invested heavily and we'll continue to do that," Mark Gainsborough, Shell Lubricants executive vice president, said on Thursday.
Gainsborough made the comments on the sideline of the company's kick-off ceremony of a new $132 million oil blending plant in Bekasi,West Java, which has been deemed the "most significant investment in Indonesia for many years."
"For us, building a blending plant here is a bet upon the economic success in Indonesia. If Indonesia grows well in the next two years, then it would be a good investment for us," he said.
Preparations, planning and construction on the plant began five years ago, Gainsborough said.
"I think it's a good time to be investing. What makes it ideal is if the demand was going faster, but it's still a good time," he said.
Gainsborough acknowledges Indonesia's slow growth, particularly in the automotive industry which is considered a driving force behind the lubricant and fuel industries, but he remains unconcerned.
Indonesia's economy expanded 4.73 percent in the July to September period, compared the same period a year earlier.
According to Indonesia's Automotive Industry Association, or Gaikindo, car sales shrank at a faster pace in September from a year earlier as manufacturers shipped only 92,478 cars to distributors, down from 102,711 in the same period a year earlier.
"Inevitably, you get periods where the industry is not going so well. Indeed, the sale of vehicles is quite a bit [lower]. ... But we believe it's part of a normal business cycle.
"We see a lot of motorcycles at the moment, but in the future some of those motorcycle owners will want to drive cars. I think in the long run there's a lot of potential growth in the automotive sector and a lot of potential growth in the industry as a whole," he said.
In five to ten years time, Gainsborough said, the company might expand the plant in Bekasi to cope with a growing lubricant demand both domestically and overseas.
The 75,000-square meter plant, located in the Marunda Center industrial estate, can produce up to 136 million liters lubricant each year while Indonesia's demand for engine lubricant has reached 1.8 billion liters each year.
The local industry can only supply 850 million liters at this stage. "When we design a plant like this, we always design it thinking about how we will use it in the future. The space here will be able to contain more capacity in the future if the demand justifies it," he said.
Gainsborough said in his experience, plants like the one in Bekasi can add up to 50 percent of its current capacity.
"The plant wasn't designed to be an export plant ... But we would like to have the flexibility to export as well. We are discussing with the authority on how to make it simpler to export," he said.