Interview: U.S.-RI joint venture to build $3.5 billion oil refinery

A consortium consisting of U.S. and Indonesian investors hopes the construction of a US$3.5 billion oil refinery in South Sulawesi can begin in May and start commercial production in four years, the Dow Jones Newswires reported on Friday.

"Hopefully, we will do the groundbreaking (for the project) May 20," Mappasulleh H.S., president of PT Intanjaya Agromegah Abadi, told Dow Jones Newswires in an interview.

Intanjaya holds a 30% stake in PT Kilang Minyak Intan Nusantara, the owner of the planned refinery, which will be built in South Sulawesi's coastal town of Pare Pare, whereas a consortium of several U.S. investors led by Texas-based Inter Global Technologies holds the remaining 70%, Mappasulleh added.

The refinery will produce 300,000 barrels a day of petroleum products, of which 90% will be exported and 10% sold in the domestic market.

"We may increase the percentage of domestic sales if it's needed," he said.

Mappasulleh said he hopes the refinery will help reduce Indonesia's need to import petroleum products amid rising demand at home.

Indonesia, the only Southeast Asian member of the Organization of Petroleum Exporting Countries, is a net importer of petroleum products, as total production from local refineries run by state-owned oil and gas company Pertamina amounts to around 980,000 b/d, while consumption is around 1.125 million b/d.

Former president Suharto's government had issued licenses to a handful of companies backed by international investors to build oil refineries across the country, although at that time, the government was abiding by the old oil and gas law, which allowed only state-run oil refineries to do so.

But the economic crisis, which led to Suharto's ouster in May 1998, and the subsequent political tumult forced these companies to put their investment plans on hold.

A new law, aimed at opening up the country's oil and gas industry to fair competition, was introduced in 2001.

The Pare Pare project, which got its license around nine years ago and has experienced a change in shareholders, could be the first privately run oil refinery in Indonesia.

Mappasulleh said the refinery complex will be built on 1,000 hectares of land and will include a jetty, housing complex and other social facilities.

He declined to mention the project's financing source but said there were no problems with financing. (*)