Hatta: Govt to provide incentives for new refineries development
Monday, February 13 2012 - 03:22 AM WIB
Coordinating Minister for the Economy Hatta Rajasa said the government will provide incentives in the form of tax holidays to investors for developing new oil refineries in the country.
?We (government) will provide tax holidays as incentives,? Hatta Rajasa told reporters in Kupang, East Nusa Tenggara at the weekend.
?Indonesia needs huge volume of oil to meet domestic growing demand. The problem is that we don?t have enough oil refineries to process the crude oil,? he noted.
A number of foreign oil and gas companies have expressed interest to build refineries, however, they are demanding better incentives from the government.
Kuwait Petroleum Corporation, as a case in point, is waiting for a definitive government incentives package before moving forward with the construction of a new refinery in Balongan, West Java.
Through its subsidiary, Kuwait Petroleum International, the company has signed a Memorandum of Understanding (MoU) two years ago with state oil and gas firm PT Pertamina to conduct a feasibility study for building the refinery that would process crude from Kuwait Petroleum. The company and Pertamina have long teamed up in trading and other upstream oil and gas businesses.
Pertamina has six refineries across the country with a total processing capacity of 1.03 million bpd. The refineries are located in Dumai, Riau, with a capacity of 170,000 bpd, Plaju in South Sumatra (118,000 bpd), Cilacap in Central Java (348,000 bpd), Balikpapan in East Kalimantan (260,000 bpd), Balongan in West Java (125,000 bpd) and Kasim in West Papua (10,000 bpd).
The six refineries produce 40.6 million kiloliters of fuels comprising 18.3 million kiloliters of diesel fuel, 12 million kiloliters of premium gasoline, 7 million kiloliters of kerosene and, 3.3 million kiloliters of aviation fuel.
The government currently only provides import duty exemptions as incentive to refinery developers. The incentive is apparently not attractive enough for investors, leading to a 10-year lull in new refineries development in the country.
Editing by Roffie Kurniawan