Kuwaiti firm to build oil refinery
JAKARTA (JP): PT Hemoco Selayar International Oil Refinery, a joint venture between a Kuwaiti firm and its local partners, has won government approval to build a US$2.4 billion oil refinery and petrochemical complex on Selayar island, South Sulawesi.
Newly appointed State Minister of Investment Marzuki Usman said on Friday that the refinery project received formal government approval last month.
"This investment is an groundbreaking project which has shown that we are still attractive for investors," Marzuki, who is also chairman of the Investment Coordinating Board (BKPM), said.
The joint venture is 60 percent owned by Hemoco Kuwait General Trading & Contracting Co. and 40 percent owned by PT Kilang Minyak Bumi, a local company controlled by the Alwy family.
Hemoco Selayar's president and chief executive officer, H.M Alwy, said the company had completed a feasibility study for the project.
He said a ceremony to mark the commencement of the project would be held in the first week of August this year.
"Construction will take four years to complete, with the first mass storage tank expected to come on line in December 2003," he said.
Alwy said Kuwait Petroleum Company (KPC) had committed itself to supplying up to 225,000 barrels of crude oil per day for the refinery.
He said the integrated oil refinery complex was expected to produce 126,665 tons of Liquefied Petroleum Gas (LPG), 3.5 million tons of gasoline, 2 million tons of diesel fuel, 226,600 tons of fuel oil and 52,000 tons of sulfur per year.
"100 percent of the output will be exported. We are taking steps to secure international markets for our products because the progress made towards deregulating Indonesia's oil sector is as yet unclear," he said.
The Company's senior advisor Robert B. Langtry said that Hemoco would conclude initial purchasing arrangements with major oil companies in China and South Korea over the next few weeks.
"Even though Indonesia is still seen as a major risk by many international investors, there are markets with hard currencies that can support our sales objectives.
"China, South Korea and Japan are our core targets, and we have ensured that this integrated industry will produce materials that are both in demand by these markets and suitable to current and projected environmental requirements," Langtry said.
Hemoco Selayar's executive vice president, Mohammad Y. Iqneibi, said the project would be part financed through equity placement.
"We will raise approximately 30 percent of the project costs through direct investment from Middle Eastern investors. We are working closely with Kuwaiti Banks to identify such investors and expect to finalize these arrangements within one month," he said.
"Project finance and export credit will make up the balance of the $2.5 billion," he added.
Iqneibi said the present economic climate had made borrowing money from banks more expensive than inviting other parties to invest in the project.
Alwy said Selayar island had been chosen for its proximity to future growth areas in eastern Indonesia and for its ease of access to foreign markets.
"After studying other locations such the Philippines and Malaysia, we decided that Selayar was the best location for our project.
"The island is near to shipping lanes which run through the Lombok Strait and link the Indian Ocean with countries in Northern Asia," he explained.
Alwy said that Hemoco has also applied to develop Selayar into an integrated economic development zone in a bid to transform the island into a center for the petrochemical business in the region.
As part of the company's plans for Selayar, Hemoco has begun operating a new air transportation company called Selayar Maleo Air.
The airline, which has a fleet of five aircraft, was set up in anticipation of an increased demand for exports of marine-related products from eastern Indonesia, as well as to meet the needs of personnel involved in developing the Selayar oil refinery complex and related businesses. (gis)