Oil refinery investors seeking for government’s incentives

A number of investors intending to build oil refineries in the country have demanded the government to provide them with a number of incentives such as tax reduction and price guarantee.

Erie Soedarmo, the director for oil and gas marketing at the ministry of energy and mineral resources, said in Jakarta on Wednesday that the investors needed such kinds of incentives as a compensation for the low profit margin they would receive from the oil refinery operations.

Erie said the return on investment from the operation of an oil refinery plant is relatively smaller than those in other industries. “The construction of a refinery plant with a capacity of about 300,000 per barrel will cost between US$2.5 billion and US$3 billion, while the profit margin from the sales of fuels will be only between US$3 and US$4 per barrel,” he added.

“That is why the investors are demanding tax incentives and the guarantee that the government will buy the fuel at certain price level,” Erie said, adding that a number of local and foreign companies such as Pertaminna’s subsidiary Elnusa Harapan and Petrorev of Australia had formally applied for permits to enter the oil refinery industry.

“The government has not yet issued the permits because most of them have not completed the requirements such as finding their business partners,” he added. (*)