More oil refineries needed to meet increasing demand<\/p>\n
JAKARTA L(JP): Indonesia is in dire need of new oil refineries
\nto meet the growing demand for oil products, Minister of Mines
\nand Energy Ida Bagus Sudjana said here yesterday.<\/p>\n
Speaking at the Indonesia Summit 1996, Sudjana noted that
\ndomestic demand currently outstrips the supply from domestic
\nrefineries.<\/p>\n
"To create energy security and avoid imports of oil products,
\nnew oil refineries need to be set up as soon as possible to meet
\nthe high growth in domestic demand for oil products," Sudjana
\nsaid.<\/p>\n
Sudjana said Indonesia currently still had shortfalls in oil
\nproducts, especially in avtur (a gas for aviation, kerosene,
\ngasoline, automotive diesel oil, industrial diesel oil and fuel
\noil. However, it enjoys a surplus in avgas (another gas for
\naviation).<\/p>\n
Nearly all refining in Indonesia is carried out by state-owned
\noil company Pertamina through its seven refinery facilities which
\nhave a combined processing capacity of close to one million
\nbarrels of crude oil per day.<\/p>\n
Sudjana said Pertamina would consider building one more oil
\nrefinery, which will probably have a processing capacity of
\n125,000 barrels of crude oil per day.<\/p>\n
He said at least 37 private companies have applied to build
\nrefineries.<\/p>\n
He added that the government had approved several private oil
\nrefinery projects, including those in Pare-Pare, South Sulawesi,
\nas well as Probolinggo and Gresik, both in East Java.<\/p>\n
According to the Investment Coordinating Board, the government
\nlast year approved seven refinery projects worth $12.7 billion.<\/p>\n
To facilitate private investment in the country's oil refinery
\nindustry, Sudjana said, the government is currently drafting new
\noil and gas laws to replace the law number 44\/1960 and law number
\n8\/1971.<\/p>\n
"The proposed law will basically open the downstream oil
\nindustry to the market mechanism, allowing private parties to
\nenter the oil refinery, transportation, distribution and retail
\nbusiness," Sudjana said.<\/p>\n
However, the proposed law won't change the present dominance
\nof Pertamina in the upstream oil industry, which consists of
\nexploration and production.<\/p>\n
Sudjana warned that if Indonesia could not reduce oil
\nconsumption in the near future, Indonesia would become a net
\nimporter of oil by the turn of the millennium.<\/p>\n
Meanwhile, Baihaki H. Hakim, president of PT Caltex Pacific
\nIndonesia, the largest local oil producer here, predicted that
\nenergy demand in Indonesia would almost double in 10 years to
\nabout 820 million barrels of oil a year.<\/p>\n
Barring any dramatic change in current trends, demand for oil
\nwill increase at a phenomenal rate, with the economy growing at a
\nrate of over seven percent per annum and electricity consumption
\ngrowing at an annual rate of about 15 percent.<\/p>\n
Oil currently supplies 65 percent of Indonesia's domestic
\nenergy needs. By 1998, about 52 percent of energy will come from
\noil, 17 percent from coal, 24 percent from gas, 5 percent from
\nhydropower and 2 percent from geothermal steam.<\/p>\n
Indonesia currently has estimated reserves of 70 billion
\nbarrels of oil and 200 trillion standard cubic feet of gas which
\nare in identified basins.<\/p>\n
However, proven reserves stand at only 10 billion barrels of
\noil and around 115 trillion standard cubic feet of gas.<\/p>\n
Sudjana said Indonesia would need US$3.5 billion a year to
\nmaintain the current level of reserves, of which 1.5 billion
\nwould go towards exploration, and $2 billion towards development
\nand production.<\/p>\n
Baihaki said that the growth of the upstream oil industry
\nwould probably slow down, because large reserves are difficult to
\ndiscover, costs are relatively high due to the limited
\ninfrastructure in remote and isolated areas, and the relatively
\nlow level of world oil prices.<\/p>\n
Yet Sudjana was upbeat about the prospects of the upstream oil
\nindustry because an average of 13 exploration contracts were
\nsinged annually.<\/p>\n
He promised that the government would continue to improve the
\ninvestment climate in the oil upstream operations to attract more
\ninvestment in the sector.<\/p>\n
He said that his office is considering new incentives to
\nattract oil investment in eastern parts of the country as oil
\nexploration costs in this region are considered high. (rid)<\/p>\n
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