The Energy and Mineral Resources Ministry is preparing a series of incentives to lure investors into fuel refinery construction, including scrapping import tariffs for equipment, an official says.
Director general for oil and gas at the ministry, Evita H. Legowo, said a team from the ministry was now discussing attractive incentives.
"The government has previously created incentives and reduced tariffs based on Finance Ministry regulation.
But investors are still not interested. Now we are thinking about totally scrapping tariffs," she told reporters Friday.
Evita added the government might offer to guarantee refinery contractor loans as another alternative.
"If the government guarantees those loans, investors will be able to access loans at a lower rate of interest. The government offered a similar guarantee for the *first phase of* 10,000 megawatts electricity projects," she said.
Furthermore, the ministry is also considering establishing an agency tasked with finding appropriate locations for the refineries and handling issues related to land acquisition, which have been major obstacles in fuel refinery development projects.
She, however, quickly added the three alternatives above were still being discussed.
"The plans are related to *the policy of* the Finance Ministry. Thus, we must discuss them further with the Finance Ministry," she added.
"One thing for sure, new refineries must be developed. We have wanted new refineries since the 1990s," Evita said.
Indonesia needs about 1.4 million barrels of fuel per day.
Currently the country only has seven fuel refineries, all of them operated by state oil and gas company PT Pertamina, which has a production capacity of about one million barrels per day. As a result, the country has to import fuels to meet domestic demand.
"Thus, we need refineries with a total capacity of at least 400,000 barrels per day," Evita said.
Pertamina's president director Karen Agustiawan said recently Pertamina's refineries were able to meet the domestic demand for subsidized kerosene and diesel. However, the seven refineries could not meet the domestic demand for subsidized Premium gasoline and non-subsidized fuels.
Karen said Pertamina's refineries only produced 11 million kiloliters of subsidized Premium gasoline, while domestic demand for the fuel reached 21 million kiloliters.
For non-subsidized fuels, Pertamina refineries have a production capacity of 9 million kiloliters, while the domestic demand is 10 million kiloliters.
Karen said Pertamina was planning to build three new refineries which would be located in Bojanegara (Banten Province), Tuban (East Java) and Balongan (East Java).