Ministry insists Pertamina to continue refinery projects

The Ministry of Energy and Mineral Resources insisted state-owned oil and gas firm PT Pertamina to continue the refinery projects assigned by the government although their completion would be delayed from the initial deadline.

Deputy Minister of Energy and Mineral Resources Arcandra Tahar said in a statement issued over the weekend that the government will help Pertamina in resolving the various obstacles including in seeking the required financing.

?The refinery (projects) must go on. We?re trying to resolve the obstacles, which will cause delay (in the completion of the projects),? Arcandra said in the statement, but did not provide much details.

The country?s existing refineries have a combined production capacity of around 800,000 bpd, while domestic fuel demand stands at around 1.6 million bpd, forcing the country to import fuel products to meet the demand. To help resolve the problem, the government has assigned Pertamina to develop two new refineries namely Tuban and Bontang refineries, and expand existing ones including Balikpapan, Cilacap, Balongan and Dumai, all of which must be completed by 2023, which will increase total capacity to 2 million bpd, when domestic fuel demand is project to reach near 2 million bpd.

The refinery projects are estimated to cost around US$36.27 billion. So far, the company has signed agreement with Russia?s Rosneft to partner in the development of the Tuban project, and with Saudi Aramco in the Cilacap project. Pertamina is still struggling to get partners in the other projects.

Pertamina President Director Elia M. Manik in August appealed to the government to review the refinery projects due to the huge financial burden especially as the company is also tasked with the development of other projects including acquiring oil and gas blocks whose contracts have or are set to expire within this and next year. Elia also feared that the development of new refineries and expansion of existing ones are feared to create excess capacity or the facility may turn idle in the future as the government is also pushing for the development of renewables. Elia said that given the difficulties in getting funding and strategic partners, the completion of the projects may be delay by up to three years.

Editing by Reiner Simanjuntak