Iran plans to build $1billion oil refinery in East Java
Fitri Wulandari, The Jakarta Post, Jakarta
Iran plans to build and operate a US$1 billion oil refinery in the East Java province to accommodate Indonesia's increasing demand for oil-based fuel, Iran's ambassador said on Thursday.
Iranian Ambassador to Indonesia Shaban Shahidi Moaddab said the planned project would be carried out jointly by the state- owned National Iranian Oil Co. and Indonesia's state-owned oil and gas company PT Pertamina.
"We have been observing developments for one year and the right investment is in oil and gas. We have discussed the idea with the government and Pertamina," Moaddab told reporters in a press conference after opening a seminar on the Indonesian-Iran oil and gas joint-venture.
"It is important for us to have Pertamina present in this project," he said. The project was also open to other investors.
Iran is gathering the capital and technology for the project.
Moaddab did not give details of the extent of Pertamina's presence in the project or its timeline.
He said the refinery, which is expected to process up to 150,000 barrels of crude oil a day, would help supply Indonesia's high demand for oil-based fuel.
"I understand that Indonesia presently still imports 20 percent of its oil-based fuel. (The refinery) is expected to compensate that," he said.
There are seven oil refineries in Indonesia with a combined capacity of about 1 million barrels of oil per day (bpd).
However, this capacity only covers 80 percent of the country's oil demand, which has reached 1.2 million bpd. Indonesia imports the remaining 20 percent from various countries, including Iran.
Indonesia imported 5,538 and 3,667 barrels of oil in 2001 and 2000 from Iran. The country's oil-based fuel consumption reached 57.4 million kiloliters last year.
Moaddab said the refinery was likely to be built near Pertamina's petrochemical industry PT Trans Pacific Petrochemical Indotama (TPPI) in Tuban, East Java.
The main reason for selecting the area was because there was no oil refinery yet in East Java. Turban was also an industrial area.
Minister of Energy and Mineral Resources Purnomo Yusgiantoro said constructing an oil refinery close to the petrochemical industry was an good decision, allowing synergies in production.
Development of the Tuban petrochemical industry was halted in 1998 following the regional economic crisis.
The project, in which Pertamina has a 15 percent stake, received a $400 million loan from Japan's Sumitomo Mistui Banking Corp. and Mitsui & Co last year.
The plant has a production capacity of 500,000 tons of paraxylene a year and 100,000 tons of orthoxylene and toluene a year.