Govt promises incentives for oil refineries

President Susilo Bambang Yudhoyono promised incentives to encourage investors to build oil refineries so that in the future Indonesia will not need to import fuels.

Speaking during a visit to the headquarter of the state-owned oil and gas company Pertamina in Jakarta on Thursday, the President said that Indonesia needed more oil refineries to meet the surge in the fuel demand in the country.

But, Yudhoyono acknowledged that many investors were reluctant to build refineries because because their investment returns were relatively low, compared to the large amount of funds needed for the construction.

Fiscal incentives and a market guarantee would therefore needed to encourage the construction of new refineries in the country, he said, while at the same time, calling for the establishment of an inter-governmental team to discuss such a plan.

Pertamina plans to build a refinery in Bojanegara, Banten and another one in Tuban, East Java. The company also plans to build a new processing unit in its Balongan refinery complex in Indramayu, West Java.

In building the Bojanegra refinery, which will have a processing capacity of 300,000 barrels per day, Pertamina will cooperate with Iranian and Malaysian companies. While, for the Tuban refinery Pertamina will be the sole investor.

At present, Pertamina operates six refineries, with a total processing capacity of one million barrels per day. Between 500,000 and 600,000 barrels of crude oil per day needed by the refineries are taken from the local crude oil production, and the remainders are imported.

Pertamina still imports between 300,000 and 400,000 barrels of fuel products per day to meet the domestic demand which total about 1.4 million barrels per day. (godang/bernard)