Pertamina, MoF formulating TOR for refinery project

By Febry Silaban

State-owned oil and gas firm PT Pertamina and the Ministry of Finance (MoF) are currently in the process of formulating the terms of reference (TOR) for a planned international tender to be held in early 2014 to select contractors for the development of fuel refinery project under the so-called public-private partnership (PPP) scheme.

"The TOR has not been completed. Currently the team is completing the feasibility study. The work will be targeted to be completed at the end of the year," said Vice President for Corporate Communications at Pertamina, Ali Mundakir, in Jakarta.

According to Ali, the government should give fiscal incentives to foreign companies that intend to build refinery in the country.

"Fiscal incentive from the government is a natural thing for companies who want to build a refinery as the refining business requires a high investment with a relatively low rate of return," he explained.

To determine the incentives for building refineries and the TOR of the auction, the government has made comparisons with the practice in many countries.

According to Pertamina, countries such as Thailand, Vietnam, India, China and Brazil have provided incentives to investors who intend to build refinery in the respective countries, both in the forms of fiscal incentives, licensing and financial.

The Indonesian government is currently committed to build three oil refineries, which are expected to reduce the country?s oil imports.

For the construction of the oil refinery, the government has established two funding options: via the state budget and PPP scheme investment.

Editing by Reiner Simanjuntak