Exploration of Pertamina - Photo by Pertamina

JAKARTA (TheInsiderStories) – Saudi Aramco to start supply gasoline to Indonesia’s oil & gas producer PT Pertamina starting July, said traders last week. Its trading armed Saudi Aramco Products Trading Company will be supplying a total of about 1 million barrels a month.

Saudi Aramco and Pertamina has plan to set the formation of a joint venture (JV) to repair and improve of the capacity of the new Cilacap Refinery end of 2019. Therefore, the state-owned company and Saudi Aramco need to revise the previously JV agreement.

Pertamina will hold a 55 percent stake in the upgrading project of Cilacap Refinery to be able to control a JV with Saudi Aramco. After the joint venture agreement is signed, Pertamina and Saudi Aramco will start FEED work.

The company also targets the clarity of asset transfer and fiscal incentives in the form of tax holiday. Later, Pertamina’s current assets will be included in the joint venture.

The Cilacap refinery development is part of the Refinery Development Master Plan (RDMP) of Pertamina, in its effort to meet national energy demand across the Indonesian archipelago. Apart from Cilacap, the RDMP is to be rolled out to upgrade other refineries, namely, Balikpapan, Riau’s Dumai and West Java’s Balongan.

Indonesian Oil Refineries Data by MEMR

The RDMP project is projected to boost Cilacap output to 400,000 barrels per day (bpd) from a current 348,000 bpd. The cost to upgrade the Cilacap refinery is projected to reach around US$5billion. The Cilacap refinery is targeted to start operating in 2023.

Furthermore, there will be additional gasoline production 80 thousand bpd, diesel 60 thousand bpd, and avtur 40 thousand bpd. Fuel production rose significantly because the ability of refineries to process crude oil into finished products rose from 74 percent to around 98 percent.

Last year, Indonesian Energy Ministry and its Saudi Arabian counterpart have renewed their commitment to speed up the development of Cilacap refinery. The commitment was reaffirmed during the visit of Indonesia’s Deputy Energy & Mineral Resources Minister, Arcandra Tahar, to Saudi Arabia and the United Arab Emirates (UAE) on Oct. 24-26, 2017.

“Indonesia will push for the acceleration of the development of RDMP Cilacap Refinery (a cooperative venture between Pertamina and Saudi Aramco),” Tahar said in a statement on Oct. 31.

Pertamina and Saudi Aramco have signed a Heads of Agreement to formalize key business principles for joint ownership, operation and upgrade of the Cilacap Refinery located in Central Java in 2015. The agreement includes a long-term supply agreement for Arabian crude to Cilacap refinery.

Participation in the RDMP will offer Saudi Aramco a major growth component of its global Downstream expansion portfolio aspiration, designed to make the company the world’s leading integrated energy and chemicals company. The investment would take place within a high growth petroleum demand in South East Asia which has been earmarked in the company’s downstream strategy.

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