Saudi Arabia give a surprised a crude oil production cut by 1 million barrels a day starting this month but uncertainty over the outcome of the Georgia election run-offs - Photo by Pertamina Office

JAKARTA (TheInsiderStories)– Indonesian state energy company, PT Pertamina and Saudi Arabian Oil Co. (Saudi Aramco) have finally agreed on Cilacap’ refinery joint venture. The two parties sign agreement on the sidelines of the Group of 20 (G20) meeting in Japan on Monday (06/17).

In a released statement, Pertamina’ VP-corporate communication Fajriyah Usman explained, the two parties agreed to jointly involve reputable Financial Advisors in order to finalize the valuation and cooperation scheme. This is important to ensure that cooperation in developing refineries will be beneficial for both parties.

“We welcome this agreement, hopefully, it will become a win-win solution that can be accepted by both parties and accelerate the start of the development of the Cilacap refinery,” she said.

Usman added, the joint venture development agreement between Pertamina and Saudi Aramco is currently underway and is due to end at the end of June 2019. However, this agreement will be extended until the end of September 2019.

“Thus, the valuation and cooperation scheme between Pertamina and Aramco for the Cilacap refinery must be completed in the next 3 months,” she adds.

Both had previously expected to sign the agreement in November. 2018. The signing was suspended as both parties could yet agree on four issues: crude oil supply, control management, asset valuation, and lifting.

On crude supply, reportedly, both have agreed that Saudi Aramco will get 70 percent of supply. On management control, Pertamina will appoint three members of the board of directors, while Saudi Aramco will appoint two. On lifting, domestic refining will be handled by Pertamina and export may be carried out by both.

Pertamina’ president director Dwi Soetjipto said that cooperation between Pertamina and Saudi Aramco is expected to boost refining capacity. Currently, Cilacap refinery’s capacity is 348,000 barrel per day (bpd), which will be stepped up to 400,000 bpd.

Soetjipto further said that US$5 billion (Rp65 trillion) has been invested to develop Cilacap refinery. Pertamina will hold 55 percent and Saudi Aramco with a 45 percent stake.

To support the project, the government will form a joint team from the State-Owned Enterprises Ministry, Energy Ministry, Finance Ministry, and Pertamina to ensure that all processes are carried out in accordance with applicable laws and regulations.

The development of the Cilacap Refinery is part of the 6 Refinery Development Master Plan (RDMP) and New Grass Root Refinery (NGRR) projects to increase Pertamina’s fuel production capacity, from currently around 1 million bpd to around 2 million bpd. The six projects are Cilacap RDMP, Balikpapan RDMP, Balongan RDMP, RDMP Dumai, Tuban NGRR, and Bontang NGRR.

In addition to increasing refinery capacity, the quality of the products produced will be better, reaching the EURO V standard that is more environmentally friendly.

Previously, Pertamina had also completed the Cilacap Blue Sky project, which began operating since March 2019, so that currently the Cilacap refinery has produced more environmentally friendly fuel oil with the EURO IV standard.

US$1: Rp14,300

Written by Willy Matrona, Email: