Saudi Aramco and state-owned energy producer, PT Pertamina resume their negotiation on Cilacap oil refinery, state Own enterprise Minister told reporters on Tuesday (10/29) - Photo by MEMR Office

JAKARTA (TheInsiderStories) – Saudi Aramco and state-owned energy producer, PT Pertamina resume their negotiation on Cilacap refinery, state Own enterprise Minister told reporters on Tuesday (10/29). As known the discussion between the two companies it hasn’t been final since two years ago.

The minister, Erick Thohir asserted, the government wants Pertamina to continues the Cilacap refinery upgrade with Aramco or other partners, if the negotiation fail.

“We are trying to have an agreement this year,” he said after meet energy and mineral resources minister Arifin Tasrif yesterday.

On June 17, Pertamina and Saudi Aramco have finally agreed on Cilacap’ refinery joint venture at the sidelines of the Group of 20 (G20) meeting in Japan. Both agreed to jointly involve reputable financial advisors in order to finalize the valuation and cooperation scheme.

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 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 SOEs ministry, EMR 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 six Refinery Development Master Plan and New Grass Root Refinery projects to increase Pertamina’s fuel production capacity, from currently around 1 million barrels oil per day (MBOPD) to around 2 MBOPD. The six projects are Cilacap RDMP, Balikpapan RDMP, Balongan RDMP, RDMP Dumai, Tuban NGRR, and Bontang NGRR.

US$1: Rp14,000

by Linda Silaen, Email: linda.silaen@theinsiderstories.com