Govt to provide incentives for new refinery development

The government is considering providing tax holiday for firms willing to construct new refinery in the country, The Jakarta Post reported on Tuesday.

 

Luluk Sumiarso, Director General of Oil and. Gas at the Energy and Mineral Resources Ministry said Monday that his ministry was engaged in talks with other relevant ministries and the Investment Coordinating Board (BKPM) so as to prepare specific arrangements.

 

“We have been discussing the issue for almost a month and the BKPM has been very supportive of the idea,” Luluk said, adding that the incentives would likely take the form of exempting eligible firms from all taxes during the construction phase.

 

The government hopes the proposal will attract more investors to the sector and eventually help the country which is now a net oil importer achieve self-sufficiency in fuel supplies over the long run.

 

Luluk added that later this week, the directorate general would invite refinery operators to a meeting to share views on what investors want. Luluk also suggested that the companies establish an association.

 

Indonesia currently has seven refineries, all of which are owned by state-owned oil and gas firm PT Pertamina. The seven refineries boast a total installed capacity of 1.050 million barrels of oil per day (mbopd).

 

However, government only manage to produce around 722,000 barrels of refined oil per day (bpd), meaning that the country has to import between 310,000 bpd and 325,000 bpd in order to meet domestic demand, which stands at 1.030 mbpd.

 

A number of firms has planned to build refineries in Indonesia so far, but none has been realized. Industry players said that lack of incentives, swelling costs, low margin and lack of long-term crude supply had caused refineries development plan stalled. (*)