Government approves $6b refinery projects
JAKARTA (JP): The government has approved two oil refinery projects valued at US$6 billion to be built by a joint venture in Pare-Pare, South Sulawesi, and Batam.
The refineries will be built by a joint venture of investors from Saudi Arabia, China and Indonesia. The joint venture, PT Kilang Minyak Intan Nusantara (KMN), received approval for the Pare-Pare refinery last week from the Investment Coordinating Board (BKPM), while plans for the Batam refinery were approved by the Batam Authority Board, which issues investment permits for the island.
Ibrahim Al-Oqab, president of the Saudi Arabia-based International Business Company (IBC), said KMN also had received President Abdurrahman Wahid's support for the projects during a meeting earlier this month.
"There is an opportunity to invest here in Indonesia, and so we have entered the country," Al-Oqab said during a media conference.
KMN expects to start construction on the refineries next year, with commercial production slated to begin in the fourth quarter of 2004.
The two refineries, valued at $3 billion each, will have a production capacity of 300,000 barrels of oil per day, 90 percent of which KMN plans to export.
Al-Oqab said the crude oil for the refineries would be wholly imported from the Middle East and the majority of the processed oil would be exported to China.
The Pare-Pare refinery is expected to export $1 billion worth of fuel per year, while the Batam refinery is expected to export $3.63 billion worth of oil per year, KMN said.
The refinery in Pare-Pare, Ibrahim said, will supply China and other East Asian countries, including Japan, Korea and Taiwan. The refinery in Batam will supply markets like Singapore, Thailand, India and Bangladesh, he said.
Indonesia's proximity to these markets, Ibrahim added, was one of the reasons why investors chose the country for this project.
Asked if the investors were fazed by Indonesia's security and political instability, he said he felt Indonesia was safe.
"Seeing through my glasses, I see Indonesia as a good country for investment. I don't care what other glasses see," he said.
Mappasulle, the president of local partner Intanjaya Agromegah Abadi, said world economic development still depended on energy, thus making this a prospective industry.
"Especially if we look at China with its fast-growing economy," he added.
He said KMN would retain 10 percent of the refineries' production for the domestic market.
State oil and gas company Pertamina might purchase the oil from KMN if necessary, he explained.
KMN is 40-percent owned by IBC in partnership with another Saudi Arabian firm, Al-Bandar International Group.
Another 40 percent is owned by the China National Electrical Equipment Corporation (CNEEC), Investment Pacific Inc. and Lau Swee Seng.
PT Intanjaya Agromegah Abadi owns the remaining 20 percent stake. The local company is a joint venture with the American firm Inter Global Technologies, which has a 5 percent stake in Intanjaya.
The president of Inter Global, Michael Tomayko, said his company planned more investments in the Indonesian oil industry that might reach several billions of US dollars.
Inter Global, he added, also is interested in pipeline projects and agricultural projects, with total investments worth $1.5 billion and $1 billion, respectively.
"I would say there will be another four to five billion dollars (in projects) announced in the next 30 or 60 days," he said. (bkm)