JAKARTA, Wed Jan 31, 2007 (Reuters) - Indonesian state-owned trading firm PT Rajawali Nusantara Indonesia (RNI) said on Wednesday it plans to build two ethanol factories with a total capacity of 200,000 litres a day to tap growing demand.
The company will build one ethanol factory in Cirebon, Central Java, and another in Malang in East Java, each with a capacity of 100,000 litres a day, said Son Ramadir, RNI's development director.
The project will cost $40 million and the factories are expected to be completed between 2008 and 2009.
"We are developing a new strategy in the downstream industry including in renewable energy to improve competitiveness," Ramadir told reporters.
"The potential is huge with the surging "The potential is huge with the surging crude oil prices and declining crude oil reserves in the country," he said.
Previously, the company had also planned to build an ethanol factory in Subang, West Java, with output capacity of 100,000 litres per day and is expected to complete construction in 2008.
RNI's move reflects growing interest in biofuel production in Indonesia as authorities are encouraging alternative sources of energy to cut fuel subsidies, inflated by soaring crude oil prices.
RNI joins several Indonesian companies that have announced plans to build green fuel plants, mostly palm-oil based biodiesel, including PT Asian Agri and PT Bakrie Sumatra Plantations
The country's vast land resources and cheap labour have also attracted several foreign companies to enter the Indonesian biofuel industry, including Golden Hope Plantations, Genting Bhd and Sime Darby Bhd and Wilmar Holding Pte. Ltd.
The most recent investment plan was from Chinese oil major CNOOC in early January which announced plans to join palm oil producer PT Smart Tbk and a Hong Kong energy firm to invest $5.5 billion in producing biofuel in Indonesia.
Ramadir said the company will use sugar-cane molasses from its own plantations for production of ethanol.
Ethanol, used as an alternative motor fuel or fuel additive, is produced from cane molasses -- a thick syrup produced from sugar cane during the sugar extraction process.
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