JAKARTA (TheInsiderStories) – Indonesia government plans to issue a presidential regulation to expedite the construction of refineries in the country. Indonesia needs four refineries to process crude oil into ready-to-consume gasoline products with a combined capacity of 300,000 barrels per day to meet domestic demand for fuel and at the same time reducing fuel imports.
Director General of Oil and Gas at the Energy and Mineral Resources Ministry, I Gusti Nyoman Wiratmadja Puja, said the implementation of the regulation is necessary during the next decade to serve the legal basis to accelerate the construction of refineries.
He added one of the options is that the refineries will be built by corporate or by the government in association with corporate borne by the state budget. The government is also considering assigning state energy company PT Pertamina to take over the task.
News agency Antara reported that Saudi Aramco, a Saudi Arabian giant oil and gas company, has renewed its commitment to invest $10 billion in developing refineries in Indonesia.
Cabinet Secretary Pramono Agung told reporters at King Faisal Palace, Jeddah, that the investment commitment is in the form of building refineries, depot (storage) and building a distribution system. He made the statement after President Joko Widodo met with Saudi Arabian government leaders during his Middle East visit.
“One of the things discussed during the meeting with the Saudi Arabian Finance Minister was the intention of Aramco to build refineries and storage facilities and a distribution system in Indonesia,” Pramono said.
Pramono added that in the past few months, the government had prepared new regulations that enable private sectors to build refineries and oil storage facilities.
The state owned energy company Pertamina is currently operating a number of oil refineries, however, most of them are ageing refineries. The existing refineries are only able to processed crude oil into fuel and meet only half of domestic market demand of around 1.4 million barrels per day. Half of the fuel demand is imported. Therefore Indonesia needs to upgrade its existing facilities as well as build new ones.
The government and Pertamina have been in recent years invited potential investors to invest in refinery projects. Some investors have expressed interest, but yet to realize their plan as the government rejected their demand to provide incentives.
Meanwhile, late last year, PT Pertamina signed memorandum of understanding (MoU) with three partners to upgrade its aging oil refineries. The three partners are Aramco Asia, JX Nippon Oil & Energy Corporation and Sinopec (Asia Tenggara) Pte.Ltd.
The partnership is an effort by Pertamina to realize its Refining Development Master Plan (RDMP) program. The estimated cost of the capacity expansion and upgrading works is projected to reach US$25 billion.
Pertamina targets the upgrading works will increase its oil refineries capacities to 1.68 million barrels per day (bpd) from 820,000 bpd at present.
The expansion and upgrading works will also increase the capacity of petrochemical products such as polyethylene, propylene, polypropylene, and paraxylene. These products are raw materials used to produce plastic products.
Under the MoU, Aramco is awarded to upgrade Dumai, Cilacap and Balongan refineries, China Petroleum & Chemical Corporation Sinopec Limited is granted to upgrade Plaju refinery and JX Nippon Oil & Energy Corp is given to upgrade Bontang refinery in Balikpapan, East Kalimantan. (*)
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