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BP Wants to Add More Gas Stations as Indonesia Builds More Toll Roads

Tassia Sipahutar and Harry Suhartono

(Bloomberg) -- Indonesia’s PT AKR Corporindo is aiming to expand its gasoline station joint venture with BP Plc to as many as 350 outlets by 2027 to take advantage of a flurry of toll-road building across the archipelago.

PT Aneka Petroindo Raya, set up by the two companies in late 2016, opened its first station last November and currently has nine outlets. The plan is to add as many as 20 to 25 stations before the end of this year and an additional 35 in 2020, said Suresh Vembu, AKR Corporindo’s business development and JV relationship director. The government’s $70 billion highway-building program will encourage Indonesians to make more long-distance car trips, he said.

“You’re adding so many new cars, you’re adding more highways, people are driving,” Vembu said an interview in Jakarta on Tuesday. “Basically, the demand for gasoline in Indonesia is one of the fastest growing in the region.”

President Joko Widodo, known as Jokowi, has announced plans to triple the length of Indonesia’s toll-road network to 5,400 kilometers (3,355 miles) by 2024, although there are questions about how the program will be funded. BP and AKR Corporindo are planning their expansion even as Indonesia considers a slew of incentives aimed at boosting the numbers of electric vehicles.

BP expects to grow the gasoline station network together with its partner over the coming years, a spokesman for the London-based company said.

The two companies are also setting up another joint venture to provide aircraft fuel, Vembu said. That business, called PT Dirgantara Petroindo Raya, will focus on serving the eastern part of the archipelago, he said.

See also: BP, Reliance to Expand Partnership to Sell Transport Fuels in India

BP’s Indonesian initiatives are similar to what it’s doing in India, where it’s formed a joint venture with Reliance Industries Ltd. that will take over 1,400 Reliance-owned gasoline stations as well as aviation fuel operations at more than 30 airports. Meanwhile, in China, BP is focusing more on electric vehicles via a venture with Didi Chuxing Inc. to build charging infrastructure.

AKR’s shares fell 1.9% as of 10:11 a.m. in Jakarta on Thursday as the Jakarta Composite Index rose 0.5%. They’re down 8.6% since Aug. 2, heading for the worst week since March, after the company reported a drop in first-half net income late last month.

The Indonesian company is also focused on expanding its industrial estate business, according to Vembu. Several foreign firms have expressed interest in relocating some operations to its Java Integrated Industrial and Port Estate in Gresik, East Java, due to the deepening U.S.-China trade war, he said.

PT Freeport Indonesia, a unit of PT Indonesia Asahan Aluminium and Freeport-McMoRan Inc., will develop a smelter in the business park. Industrial estates could easily make up 15% to 20% of AKR’s net income in the next three to four years, Vembu said.

“We want to make the industrial estate as our recurring income source,” he said. “Roads have been laid, ports have been constructed and the power plants are already ready.”

(Updates with AKR Corporindo share move in eighth paragraph.)

--With assistance from Rakteem Katakey.

To contact the reporters on this story: Tassia Sipahutar in Jakarta at ssipahutar@bloomberg.net;Harry Suhartono in Jakarta at hsuhartono@bloomberg.net

To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net, Andrew Janes, Thomas Kutty Abraham

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