Pertamina, Rosneft ink landmark agreement

Indonesian state owned oil and gas firm PT Pertamina (Persero) and Russian state owned oil and gas company OJSC Rosneft Oil Company have signed a landmark agreement to cooperate in oil and gas business, not only in Indonesia but also in Russia.

The first project where both firms will cooperate is the multi-billion dollar Tuban grass-root refinery project (GRR Tuban) in East Java province.

The agreement was signed at Pertamina?s headquarters in Jakarta on Thursday by Pertamina?s Refining Director Rachmad Hardadi and Rosneft?s Vice President for Refining Petrochemicals, Commerce and Logistics Didier Casimiro in the presence of Indonesian Coordinating Minister for Economic Affairs Darmin Nasution, Minister of State Own Enterprises Rini Soemarno, and Pertamina?s President Director Dwi Soetjipto.

Indonesia, the South East Asian largest economic country, has insufficient refining capacity and is currently importing nearly half of its total demand, especially for gasoline. Pertamina is committed to building new capacity to address the gap of supply and demand and the US$14 billion Tuban project will be a very important one in achieving the national energy security.

However, Indonesia?s current upstream production capacity is still lower than its demand. As a SOE with integrated oil and gas business, Pertamina is expected to become a global energy player and one of the world's largest integrated oil and gas companies by increasing its upstream production at home and overseas.

Following the comprehensive and rigorous selection process, Pertamina has chosen Rosneft as the most suitable partner to develop the Tuban project. Rosneft has demonstrated its strong commitment to meeting Pertamina and Indonesia?s preferences.

?Pertamina has conducted detailed and rigorous process to select the most suitable partner to conduct this project. We are looking forward to having a good cooperation with Rosneft as partner in this GRR Tuban Project,? Rachmad said.

As part of the agreement, Rosneft offers to share with Pertamina proprietary data and to accelerate the development of GRR Tuban, exclusivity right to assess partnership opportunities in upstream assets in Russia. Rosneft shows its strong commitment to supplying crude for the refinery at most competitive prices.

The total capital expenditure for GRR Tuban will be decided upon the conclusion of the feasibility study, basic engineering design (BED) and front-end engineering design (FEED). The final investment decision will be taken based on the results of the analysis. The construction is targeted to be completed by the end of 2021.

Meanwhile, the two companies are in discussion on specific upstream assets of Rosfnet where Pertamina can invest in.

Editing by Johannes Simbolon