Ministry proposes new incentives for refinery projects

The Energy and Mineral Resources Ministry has proposed additional fiscal incentives for the construction of new oil refineries in the country.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said in Jakarta on Monday that the proposed fiscal incentives would include the exemption of import duty on capital goods and the exemption of value added tax on components and spare parts for the operation of refineries.

As a matter of fact, refinery investors are now entitled to fiscal incentives in the form of income tax cuts under the amended Tax Law No. 62/2008.

Purnomo, however, said such income tax reduction would not be enough given the high risks involved in the construction of refineries and the small profit margin of investors would get from refineries.

State oil and gas firm PT Pertamina plans to build two new refineries each with a capacity of 300,000 barrels per day (bpd) in Bojanegara, Banten and in Tuban, East Java respectively, as well as a new production unit with the capacity of 200,000 bpd at the Balongan refinery complex in Indaramayu, West Java

The operation of the three new refineries, which are expected to begin operation between 2015 and 2016 would significantly cut Indonesian fuel imports. This year, the fuel demand is expected to reach 1.1 million bpd, while total output from Pertamina?s own refineries and private firms was only 740,000 bpd. (godang)