Joint venture continues with $3b refinery project

JAKARTA (JP): Representatives of PT Kilang Minyak Nusantara (KMN), a joint venture between Arabian, Chinese and Indonesian investors, said the company would go ahead with its plan to build a US$3 billion refinery in South Sulawesi despite the country's political instability.

Ibrahim Al-Ogab, president of Saudi Arabia-based International Business Company (IBC), which is a partner in the joint venture, said the consortium was determined to continue with the project on the hope that Indonesia would manage to overcome the current economic and political crisis in the near future.

"With the project, we intend to help Indonesia re-build market confidence in the business opportunities that exist in this country.

"But, the project is not merely driven by the wish to help the country but also based on the optimism that Indonesia will recover from the crisis as other countries in the region have done and will become a strong country in two years," Ibrahim said.

IBC together with Al-Banader International Group, also from Saudi Arabia, holds a 40 percent stake in KMN and is in partnership with a consortium comprised of Chinese companies China National Electrical Equipment Corporation (CNEEC), Investment Pacific Inc., and Law Swee Seng, which hold a 40 percent stake.

The remaining 20 percent is held by a joint venture of Intanjaya Agromegah Abadi and American firm Inter Global Technologies.

KMN has planned to build a giant refinery with a processing capacity of 300,000 barrels of oil per day in Bacukiki, Pare- Pare, South Sulawesi.

"The construction of the refinery will start in one year or maybe less than one year," Ibrahim said.

He said IBC and Al-Banader would guarantee the supply of crude oil to the refinery, while the Chinese partners will become the off-takers of the refinery's products.

He said American investment fund Alfax International Fund was ready to finance the project.

Intanjaya's president Mappasulle HS said KMN was now in the process of acquiring 1,000 hectares of land for the project.

According to Mappasulle, KMN has gained the support of President Abdurrahman Wahid and obtained permits from the local authorities.

It was seeking to obtain a "recommendation" from Minister of Energy and Mineral Resources, which is a prerequisite for the company to obtain the final license from the Investment Coordinating Board (BKPM).

He said the company did not need to seek approval from state oil and gas company Pertamina "because the planned refinery will not take crude oil from the domestic market and will sell most of its products to the overseas market."

Mappasulle further added that aside from the Pare-Pare refinery project, KMN also planned to build another refinery of the same capacity on Rempang Island in Riau.

He said the company would begin the construction of the Rempang refinery six months after the construction of the Pare- Pare project started.

Another investor, PT Hemoco Selayar International Oil Refinery, which is 60 percent owned by Kuwaiti firm Hemoco Kuwait General Trading and Contracting Co, announced two years ago plans to build a $2.4 billion refinery on Selayar Island, also in South Sulawesi.

But, the future of the project remains unclear. (jsk)