Govt offers mini refinery projects to investors

The government plans to build mini refineries in eight clusters near marginal oil fields and the projects will be offered to private sector, the Directorate General of Oil and Gas at the Ministry of Energy and Mineral Resources said in a statement on Wednesday.

The eight clusters are North Sumatra (Cluster 1), Selat Panjang Malaka (Cluster 2), Riau (Cluster 3), Jambi (Cluster 4), South Sumatra (Cluster 5), South Kalimantan (Cluster 6), North Kalimantan (Cluster 7) and Maluku (Cluster 8).

Director of Oil and Gas Program Oversight Agus Cahyono Adi said on Monday that the mini refineries will built at the wells of marginal fields in order to cut costs.

At present, marginal fields have high production costs because, aside from producing a small amount of output, the operator of the fields have to take their output to floating storages, which are sometimes located hundreds of kilometers away. If the output is taken to floating storage, the production process is considered as an upstream scheme with the transportation cost considered as part of cost recovery. If the output is taken at the well?s site, it is considered as a downstream scheme with zero transportation costs.

?Rather than taking the production to floating storages hundreds of kilometers away, it would be better to build refineries near the well so that the output can be immediately processed into products,? Agus said.

He noted however mini refinery has weaknesses. It is only able to produce diesel since diesel production is basically a simple process, while in order to produce gasoline, it needs more advanced technology.

The mini refineries have an average capacity of 10,000 bpd each. The Cluster 1 refinery is planned to be built near Rantau and Pangkalan Susus fields; Cluster 2 near Emo Malacca Strait and Petroselat blocks; Cluster 3 near Tonga, Siak, Pendalian, Langgak and WestArea blocks; Cluster 4 in Palmerah, Mengoepeh, Lemang and Karang Agung blocks; Cluster 5 around Merangin III and Ariodamar blocks; Cluster 6 around Tanjung block; Cluster 7 near Sembakung, Mambrungan and Pamusian Juwata blocks; Cluster 8 around Oseil and Bula blocks.

Agus admitted there are few companies that have been licensed to do refinery business, namely PT Pertamina, TPPI and TWU. The government will however issue temporary license for any companies interested in the project.

Editing by Johannes Simbolon