"Building a lube oil factory will mean greater dependence on imports for basic materials," Hidayat said here on Tuesday after a ground breaking ceremony for the construction of a Shell lube oil plant.
He said lube oil industry is strategic with the rapid increase in the number of motor vehicles and growing manufacturing industry as the main consumers in the country.
Lube oil industry, however, still faces a heavy challenge with dependence on imports for basic materials and additives, he said.
Lube industry, therefore, serves not more than as a formulation facility, he said.
The industry is not yet integrated with the upstream industry, he said, adding, investors, therefore, are expected to produce also basic materials to feed domestic lube oil industry and for exports.
Shell is building a new lube oil plant in Marunda, Bakasi, with a production capacity of 120,000 tons a year to cost around US$200 million.
Based on data at the industry ministry, Indonesia has more than 200 producers of lubricant oil mostly in Java with a total production capacity of 700,000 kiloliters per year.
The capacity makes the country a potential exporter of lubricant oils with export markets including other ASEAN countries, Japan, China, South Korea and Middle East as well as Europe.(*)