Bontang Refinery in Balikpapan, East Kalimantan - Photo by Pertamina

JAKARTA (TheInsiderStories) — Indonesia’s state-owned energy producer, PT Pertamina will co-operate with an Oman company, Overseas Oil & Gas (OOG), to develop a new oil refinery. The refinery is projected to become the biggest refinery, as it will be integrated with the petrochemical plant.

Both companies have inked a framework agreement today (12/10) to develop 300,000 barrels per day capacity from the grass root refinery, along with a petrochemical plant, in Bontang, East Kalimantan.

CEO Pertamina Nicke Widyawati explained that the company will have a fuel off-taker agreement, so the Bontang refinery can supply domestic needs, especially for gasoline, aviation turbine fuel, and liquified petroleum gas (LPG).

“By the framework agreement signing with OOG today, we can move on to the next step, conducting bankable feasibility study,” she said in a written statement.

OOG will hold the majority shares, while Pertamina received 10 percent golden shares on the refinery development. According to Pertamina’s Megaproject and Petrochemical Project Director Ignatius Talulembang, in stages Pertamina consider to increase its shares to 30 percent in stages.

Moreover, the government-to-government cooperation will also open Pertamina’s opportunity to invest in Oman. Other than that, Pertamina has also signed an engineering, procurement, and construction contract with Hyundai Engineering Co. Ltd, SK Engineering & Construction Co. Ltd., PT Rekayasa Industri, and PT PP Tbk (IDX: PTPP) for refinery development master plan valued US$4 billion, in Balikpapan, East Kalimantan Province.

The project construction will start in January 2019 and planned to be finished in August 2023, delayed from the initial plan in 2021.

While, the Balikpapan refinery will have 360 thousand barrels per day (bpd) capacity, increased from the previous capacity at 100 thousand bpd. Quality of the refinery outcome will also be enhanced, from EURO 2 to EURO 5 fuel standard. By this, Indonesia’s diesel import is expected to declined by 17 percent.

“In addition to suppressing imports, the refinery will focus on producing higher standard fuel, so it will be more environmentally friendly,” said Widyawati.

Bontang and Balikpapan refineries are some of six refinery projects that will be developing by Pertamina until 2026.

Written by Staff Editor, Email: theinsiderstories@gmail.com

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