Oil refinery investment stagnates

About 20 companies have long obtained the government permit to develop oil refinery in Indonesia, but have yet to realize their investment plan, Kontan reported on Tuesday.

According to downstream oil and gas regulator BPH Migas, one of such companies is PT Hemoco Selayar International Oil Refinery, a joint venture between Hemoco Kuwait General Trading and Contracting Co., and PT Kilang Minyak Bumi Selayar, which has yet to realize its plan to build refinery in Selayar, South Sulawesi.

Zaenal Bintang of PT Kilang Minyak Bumi Selayar said that Hemoco first obtained the government permit in 1999, and sought for an extension in 2006. ?Until today, (the investment plan) has yet to be realized. The reason is that during the (previous) Gus Dur administration, the tax holiday facility was abolished,? he said.

Ibrahim Hasyim of BPH Migas said there were two reasons hampering oil refinery investment. The first is small profit margin. ?That?s why they?re asking for incentive from the government,? he said. The second is the fear of small sales in the market despite the huge potential.

Ibrahim said that the combined capacity of existing refineries in Indonesia is about 1 million bpd, lower than the domestic fuel consumption of about 1.3-1.4 million bpd. (*)