High cost hampers construction of new oil refineries

Indonesia still need a number of new refinery plants to be able to meet its growing fuel demand but the construction of new refinery will be difficult to realize because large amount of funds are needed to build such a capital-intensive plant, Minister of Energy and Mineral Resources Purnomo Yusgiantoro said in Jakarta on Monday.

Speaking at a hearing with the Commission VII of the House of Representatives on Monday, Purnomo said that investors were also reluctant to invest in the fuel processing due to the low rate of the investment return.

"Building a refinery with a capacity of 100,000 barrels per day will cost at least about US$1.5 billion. It is very costly if compared to its low investment return," he said.

Under the new regulation, private companies are allowed to involve in the oil processing. In fact, at least seven companies have received the government's approvals to build a refinery plant.But none of them have realized their refinery projects.

Indonesia has a number of refinery plants but their production is still not enough to meet the domestic fuel demand. Some of the processed fuel needs should, therefore, be imported. (dino)