Indonesia partners with Iraq to build refinery

By Nellawati

Indonesia has secured a partnership with Iraq to develop a new oil refinery plant in order to meet the rising demand for oil fuels (BBM) at domestic market.

The energy and mineral resources ministry?s Oil and Gas Director General A. Edy Hermantoro said on Monday that they had discussed about the would-be location of the refinery, but it cannot yet be exposed.

But he noted that the development of the refinery will cost about Rp 90 trillion. Under their partnership, Iraq will supply its raw material of crude oil and also the technology to the refinery, which will be partly financed by Indonesia with its state budget.

Meanwhile, he said that the partnership plan with Kuwait and Saudi Aramco can be still implemented, providing that the investors change their demand for incentives.

"Kuwait ask many incentives. There are 10 items of them. We in the ministry consider the demand as a bit too burdensome,? he said.

But in order to realize the partnership of developing oil refinery with foreign investors, state oil and gas company PT Pertamina had been asked to conduct a new tender that offers certain incentives to investors.

Indonesia has planned to develop oil refineries since 1998, but due to a very big investment needed for such development while margin is just small, it has to stall it until now, although it badly needs the facility to meet the rising demand for BBM at domestic market.

The latest refinery built by Indonesia was the one in Balongan, which was constructed in 1994. The other refineries were built in 1970s and now have only earned small profits.

Editing by Benget Besalicto Tnb.