Indonesia lags in oil product export plans
Indonesia lags in oil product export plans
SINGAPORE (Reuter): Indonesia's ambition to be a petroleum
products exporter in keeping with its status as a major crude oil
exporter is not likely to be realized, industry sources said
yesterday.
Indonesia, Asia's only member of the Organization of Petroleum
Exporting Countries (OPEC), had drafted grand plans in the late
1980's to build four export-oriented oil refineries (EXOR) to
fulfill this dream.
But rising petroleum product imports, dwindling crude oil
production and the country's inability to attract major oil
companies to build refineries put the plans on hold.
Indonesia, the region's second largest crude producer after
China, produces around 1.41 million barrels-per-day (bpd).
However, the high crude production rate has cut its crude
reserves to 9.5 billion barrels as of June 1997, from 14 billion
in 1985.
The declining reserves also mean that the country would no
longer be a net crude exporter by 2007.
Indonesia exports around 760,000-bpd of crude and imports
about 200,000-bpd of cheaper Middle East sour crudes.
At the same time oil product consumption has risen to 810,000-
bpd from 460,000-bpd a decade earlier, forcing Indonesia to
import around 180,000-bpd of oil products.
As a result, the only refinery that was built under the
concept of production for exports had its name quickly changed
from EXOR-1 to Balongan to better reflect its role as a major
domestic supplier rather than an exporter.
The 125,000-bpd refinery built at a cost of $2 billion in 1995
in the western Javanese town of Balongan was initially conceived
to be a major exporter of gasoline, diesel and jet-kerosene fuel.
But soaring domestic demand, estimated at between six and
seven percent a year, diverted all the products to the local
market. The refinery now exports only low sulphur waxy residue
and naphtha.
"The concept was good seven or eight years ago when Pertamina
had difficulty selling the Duri crude and the plant was meant to
process this and produce gasoline and middle distillate for
export," one source involved in the project said.
State-owned oil monopoly Pertamina is currently paying back
its loan for the Balongan refinery in cash and the repayment is
expected to end earlier than the projected seven years due to
strong crude prices.
Of the three EXOR projects mooted, one was dropped after the
companies involved decided against building it due to refining
overcapacity in the region, traders said.
In theory, the other two EXOR projects are kept alive but the
license holders are not pouring in their billions yet due to
insufficient returns on investment.
Traders said when the plans were conceived 10 years ago, there
was a viable regional market for the additional capacities. But
in 1996 alone, Asian refining capacity has grown by 1.2 million-
bpd to 18.1 million bpd.
Indonesia's aim to be a major regional exporter has been taken
away by South Korea, a non-crude oil producer with a refining
capacity of 2.5 million bpd. Singapore has also enhanced its role
as a product exporter having raised its refining capacity to 1.25
million bpd in 1996.
Industry sources said even the Indonesian authorities have
recognised the wasted opportunity and have shifted their focus to
encourage the building of refineries for the domestic market.
This was done by offering private companies equity stakes in
new refineries and allowing them to sell the products to
Pertamina.
President Soeharto's decree on July 31 said: "Private
companies can cooperate with Pertamina in building and operating
the refineries through part capital ownership."
All eight Indonesian refineries with a 989,000-bpd refining
capacity are owned by Pertamina, which also has a monopoly on
domestic oil product sales.
Industry sources said 12 licenses have been issued since 1994
for the private sector to develop refineries, but all of them
remain on the drawing boards.
Major oil companies are lobbying the Indonesian government to
deregulate the domestic market before they start their projects.