New partners likely to build oil refineries

Amahl S. Azwar, The Jakarta Post | Headlines | Wed, March 27 2013, 10:04 AM

State-owned oil and gas firm PT Pertamina says it may search for new potential partners to build local refineries amid government indecisiveness on incentives for its current partners.

Pertamina investment planning and risk management director Afdal Bahaudin told The Jakarta Post on Tuesday that any new partners would supplement existing agreements with Saudi Aramco and Kuwait Petroleum.

“Pertamina will try finding new prospective partners as long as they can meet our terms, especially on technical and economic factors,” Afdal said in a text message.

Afdal was responding to statements that the government was still considering whether to give incentives to Saudi Aramco and Kuwait Petroleum for refineries that the firms want to build with Pertamina.

Pertamina has plans to build a refinery in Bontang, East Kalimantan, with Kuwait Petroleum and a refinery in Tuban, East Java, with Saudi Aramco.

Requiring a combined investment of around US$20 billion, the proposed refineries would each have a production capacity of 300,000 barrels per day (bpd) when complete.

Both foreign firms have demanded an incentive of a 15 percent increase in crude oil prices supplied to the refineries over the benchmark price provided by Mean of Platts Singapore (MOPS). The firms also want the import duty for their oil supply waived, rejecting the idea of other producers supplying crude oil to the fuel refineries, which have been slated to begin operation in 2018.

Earlier, Energy and Mineral Resources Ministry oil and gas director general Edy Hermantoro told reporters in Jakarta that the government would soon decide on the incentives.

“The Finance Ministry is still studying the requests. Our ministry expects the decision to be taken as soon as possible, no later than June,” Edy said.

Pertamina processing director Chrisna Damayanto said that the firm would not dawdle in finding new partners amid the current uncertainty. “We do not wish to remain stuck with one prospective partner only,” he said.

Perceptions among oil and gas firms have been that the sizeable investment needed for refineries would not meet their desired internal rate of return (IRR) of around 10 percent.

Indonesia has not built a new refinery since 1994, when Pertamina built a refinery in Balongan, West Java, under Soeharto.

Pertamina currently has six refineries across the nation that produce between 600,000 and 700,000 bpd of refined fuel.

Indonesia imports around 60 percent of its total fuel supply to meet the daily demand of 1.3 million bpd.



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