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.