Pertamina, Kuwait Petroleum reach a deal to build refinery
Thursday, February 16 2012 - 10:39 AM WIB
State oil and gas company PT Pertamina said it has reached an agreement with Kuwait Petroleum Corporation to build Balongan II refinery in West Java as well as with Saudi Aramco to construct a refinery in Tuban, East Java.
Karen Agustiawan, President Director of Pertamina, told Petromindo.com both companies will also supply crude oil to the refineries. She did not explain when the construction of the two refineries will begin. However, she expects the the two refineries will be ready for operation by 2018.
Karen declined to elaborate with more details about the projects.
Earlier, Pertamina said the Tuban refinery will have a capacity to produce 300,000 barrels of oil per day. Saudi Aramco was earlier seeking incentives from the government before moving ahead with the construction of the refinery.
It is not clear whether the government has agreed to provide incentives for the construction of the refinery.
Indonesia currently is in urgent needs of new refineries to cope with domestic growing demand for oil products. Oil and gas companies were reluctant to invest in building refineries due to thin margin and high investment costs. For this reason, they demand incentives from the government.
Last week, the Coordinating Minister for the Economy Hatta Rajasa said the government will provide incentives in the form of tax holidays to investors for developing new oil refineries in the country.
The government currently only provides import duty exemptions as incentive to refinery developers. The incentive is apparently not attractive enough for investors, leading to a 10-year lull in new refineries development in the country.
Pertamina has six refineries across the country with a total processing capacity of 1.03 million bpd. The refineries are located in Dumai, Riau, with a capacity of 170,000 bpd, Plaju in South Sumatra (118,000 bpd), Cilacap in Central Java (348,000 bpd), Balikpapan in East Kalimantan (260,000 bpd), Balongan in West Java (125,000 bpd) and Kasim in West Papua (10,000 bpd).
The six refineries produce 40.6 million kiloliters of fuels per year comprising 18.3 million kiloliters of diesel, 12 million kiloliters of premium gasoline, 7 million kiloliters of kerosene and, 3.3 million kiloliters of aviation fuel.
Editing by Roffie Kurniawan