Indonesia must build new oil refinery to avoid dependency on imports: Official

Indonesia needs to build a new oil refinery with a capacity of at least 200,000 barrels per day (bpd) to avoid dependency on imported oil products, a top official at state-owned oil and gas company Pertamina said on Wednesday.

Oil consumption has been increasing, while the country’s production capacity at the existing refineries is very limited, Kompas newspaper quoted the official as saying.

“For national strategic reasons, the government has to build a new refinery with a capacity of at least 200,000 bpd," Pertamina down stream director Harry Poernomo said.

"Indonesia currently imports between 25 percent and 30 percent of its needs from abroad, this is vulnerable. This figure will continue to increase in the future. What is going to happen if there are shortages of oil products?" he said.

But Pertamina has no plans to build refinery in the near future because of lack of funds and it is not profitable due to very low margin. For the time being it can only enhance the efficiency.

"Pertamina currently doesn't intend to build a new refinery on its own because of a lack of funds. If its viable Pertamina could do it through joint venture," Poernomo said.

Last month, he said Pertamina was in talks with Japan's Mitsui & Co Ltd and Mitsubishi Corp about the possibility of building a new refinery to serve the large East Java market.

"We are still in talks with them (Mitsui and Mitsubishi) and also with other companies, but Pertamina will not build on its own," Poernomo insisted.

Indonesia is expected to consume 61 million kilolitres, or 383 million barrels, of oil products in 2003, up 4.4 percent from 58.4 million kilolitres, 367 million barrels, in 2002.

The government and parliament have agreed in principle to set domestic oil products needs at around 60 million kilolitres (377 million barrels) in 2004.

Indonesia has nine refineries scattered around the archipelago with a combined production capacity of about one million barrels per day (bpd).

Pertamina said on Wednesday that it would process 985.600 bpd or around 360 million barrels of oil in 2003, compared with 373 million barrels in 2002.

Pertamina's upstream director Bambang Nugroho said the company is expected to produce an average of 44,000 bpd of crude oil in 2003 from its own operations.

Production from Pertamina's joint ventures will be at 75,000 bpd in 2003.

"We will increase our own operation's output in 2004 as we have funds for that. We have potential reserves to produce more oil 2004," Nugroho said. (*)