Pertamina in talks with Malaysia, Iran over Tuban refinery project
Tuesday, June 15 2004 - 03:43 AM WIB
"We just talked to Petronas (Malaysia's national oil and gas company) this morning about the Tuban refinery project," he said, stressing that the project, estimated to cost $1 billion, was still at an early stage.
Discussions with the Iranians began three months ago, Harry said. The National Iranian Oil Co. is the Middle Eastern country's national oil company.
Pertamina, which is coordinating the project, plans to take only a minority equity stake in the refinery. If Malaysia and Iran come on board, there won't be any need to approach other parties for the construction of the refinery, he said.
The return for investors in the refinery would be based on prevailing market rates for the oil products produced.
According to sources at the company, Pertamina doesn't want to have to fund the construction of new refineries on its own, because Indonesia's downstream sector is still under state controls, with government subsidies making the sale of oil products largely unprofitable.
Still, as Indonesia's sole supplier and distributor of oil products, Pertamina will be obliged to take all the production from the new refinery, which it is targeting for completion by 2008.
Pertamina currently operates seven refineries with a combined operating capacity totaling just under one million barrels a day, Harry said.
The domestic production of oil products currently meets only 70 percent of Indonesia's demand, with the remaining 30 percent coming from imports.
Pertamina also will pursue the upgrade and expansion of two existing refineries - its Balongan refinery to increase the production of gasoline and its Cilacap refinery to boost aromatics output, Harry said.
The upgrading and expansion projects will cost $60 million to $80 million at each refinery, and the funding already has been budgeted for next year, he said.
The executive identified petrochemical projects as a key area of interest for Pertamina's downstream investment plans, though he didn't say what projects may be in the pipeline.
"It is more value-added," he said of petrochemical production, compared with refining oil.
The construction of depots or terminals also will be on Pertamina's agenda over the near term, he said, identifying Indonesia's energy distribution infrastructure as an area in which Pertamina hopes to attract investors.
The building of depots isn't so much for profit as it is for strengthening infrastructure, Harry said.
"Petrochemical production (on the other hand) is more commercially viable," he said. (*)