Fri, 24 Nov 2000

Crisis hampers oil refinery projects

JAKARTA (JP): The Investment Coordinating Board (BKPM) said on Thursday that none of the 20 oil refinery projects approved since 1992 had been started.

"As of today, none of the projects we approved have begun production or have been realized," the board said in a statement.

BKPM said since 1992 it had approved 20 oil refinery projects worth over US$38.3 billion, comprising two domestic direct investments worth Rp 28.5 trillion ($3 billion at the current rate) and 18 foreign direct investments worth $35.3 billion.

It said the economic crisis in 1997 had prevented investors from developing their projects on schedule.

However, BKPM said, several investors were now preparing the construction of their refineries.

"All the projects plan to export their entire oil output," it said.

Investors' interest in building oil refineries in Indonesia began when talks abounded that the country planned to partly liberalize its domestic oil market under a new oil and gas law.

The local investors involved in the projects, either through local companies or foreign joint ventures, mostly had connections with former president Soeharto or were associates of his family.

Among them was the son of former president Soeharto, Bambang Trihatmodjo, who planned to build two refineries in Situbondo, East Java, and Bontang, East Kalimantan.

Bambang's firm received an investment approval from BKPM in 1994 for the $1.09 billion Situbondo refinery and in 1995 for the $366 million Bontang refinery.

Probosutedjo, who is Soeharto's stepbrother, also received a permit from BKPM in 1994 for his $3.5 billion refinery project in Probolingo, East Java.

Soeharto's golf partner, Mohammad "Bob" Hasan, has a 10 percent stake in a joint venture with Japan's Mitsubishi Corporation for the construction of a $1.25 billion refinery in West Nusa Tenggara.

Other foreign companies that took part in the projects were British Petroleum (BP) Asia Pacific, which planned a $1.5 billion oil refinery in Riau, and Japan's Mitsui & Co. Ltd., which planned a $3.15 billion refinery also in Situbondo.

UK-based Mayhill International Trading & Services Limited, which planned to build a $1.4 billion refinery in Sumbawa, expressed on Thursday its determination to go ahead with the project.

Mayhill chairman Gehad Dairawan said his company was upbeat to start the operation by September 2005.

The company plans to export its oil to Malaysia, China, the Philippines and Japan, but would set a portion aside for domestic consumption.

He said Asia-Pacific countries would in the future become the world's largest oil importers.

Mayhill's refinery would have an oil output of 150,000 barrels per day, and would receive its oil supply from Iran, the company said.

Last month, BKPM approved two oil refinery projects valued at $6 billion that were to built by a joint venture in Pare-Pare and Batam.

PT Kilang Minyak Intan Nusantara, a joint venture of investors from Saudi Arabia, China and Indonesia, said it would start commercial production some time in the fourth quarter of 2004. (bkm)