Pertamina delays construction of new refinery plants

State-owned oil and gas company Pertamina has decided to delay the construction of new refinery plants due to swelling construction costs, and will instead modify the existing ones in order to meet the surge in the fuel demand in the country.

Speaking to reporters in Jakarta on Monday, Pertamina's president director Ari Soemarno said the increase in the construction costs had forced the company to delay the construction of the two new refinery plants which would be built in Tuban, East Java and in Selayar, South Sulawesi.

"The construction cost for a new refinery plant has more than doubled since last year," he said.

According to him, many countries including Saudi Arabia has also delayed construction of new refinery plant, because with the sharp increase in the construction costs, building a refinery plant is no longer economically viable.

In 2005, Pertamina signed a memorandum of understanding with Chinese company Sinopec to jointly build a refinery plant in Tuban, East Java. The construction of the refinery plant which will have a capacity of 200,000 barrels per day.

In 2006, Pertamina also signed a similar agreement with Kuwait Petroleum Company to build a refinery plant in Selayar, South Sulawesi.

At present, Pertamina operates seven refinery plants with combined capacity of 1.07 million barrels per day. But only two of them, the Dumai refinery in Riau and the Balongan refinery in West Java, can operate at high efficiency rate.

Ari said that in order to meet the surge in the fuel demand in the country, Pertamina would modify the existing plants rather than building a new one. This year, the company plans to modify the Balongan refinery in West Java, the Cilacap refinery in Central Java, and the Balikpapan refinery in East Kalimantan to enable them to have a higher production capacity with high efficiency rate. (godang)