Pertamina, Accelon to build $6b plant

Pertamina, Accelon to build $6b plant

Grace Nirang, Bloomberg/Jakarta

State oil and gas firm PT Pertamina and Canada's Accelon Energy Systems Inc. agreed to build a US$6 billion plant that would turn coal into diesel.

The companies signed an initial agreement on Nov. 23, Pertamina President Director Widya Purnama told reporters here on Friday. Accelon will finance the project and Pertamina will buy the fuel produced at the plant to be built in Kalimantan, he said.

Indonesia, the second-smallest producer in the Organization of Petroleum Exporting Countries, is seeking to reduce fuel imports to cut costs and narrow its budget deficit. The country buys about one-third of its fuel requirements from overseas.

"We will sign a final agreement four months from now," Widya said. The plant will convert 10 million metric tons of coal into 28 million barrels of diesel a year, he said.

The plant's output will cover a third of Indonesia's diesel imports, he said. Pertamina will buy the diesel from Accelon for 15 years. It may take three years to build the plant, which has Merrill Lynch & Co. as its financial adviser.

Indonesia imports about 11 million barrels of crude oil a month, at a cost of as much as $1.6 billion.

Pertamina is planning to buy more oil pumped within Indonesia's borders to supply domestic refineries and reduce the country's oil-import bill.

On Thursday, Pertamina said it agreed to buy 250,000 barrels of crude oil from BP Plc every three months starting in December. Pertamina will buy Arjuna crude oil, which is pumped in West Java, Nina Sulistyowati, Pertamina's assistant manager for oil procurement said.