Pertamina expands to tackle private sector

Pertamina expands to tackle private sector

SINGAPORE (Reuter): Indonesia's state oil company Pertamina will expand and upgrade its refineries to produce better quality products to face private competition when the oil industry is deregulated, a Pertamina official said yesterday.

"I think the cheapest way to boost our production of refined oil products is to upgrade and expand our existing refineries," Ariffi Nawawi, Pertamina's refinery and fuel products director, told Reuters.

"We do not intend to build any grassroots refineries. We will encourage foreign companies to build these grassroot refineries," he said.

In 1989 the government allowed oil and gas projects to be financed and owned by private local companies in joint ventures with foreign investors.

But the 10 private investors who were given permits to build the refineries have not yet started construction. They said limited access to domestic retail markets would not make the refinery projects profitable.

Last week Pertamina said it was set to revoke a license issued to British Petroleum Co Plc in 1992 to build a refinery at Tanjung Uban in the Riau islands, because BP had not started work.

BP said it had ditched plans to build the 125,000 barrel-per- day (bpd) refinery because it was not economically viable.

Nawawi said: "It is a matter of time that we deregulate our downstream sector to allow foreign companies access to the domestic retail markets."

Nawawi, who was here to speak at a fuel and lube oil conference, said there was a "strong intention" from the government to decide on the deregulation bill this year.

Refineries

"Our refineries will be ready for that competition," he said. Pertamina has eight refineries with a combined capacity of 989,000 bpd.

Pertamina was already upgrading the 257,300-bpd Balikpapan refinery in East Kalimantan and plans to expand the capacity of the 300,000-bpd Cilacap refinery in central Java, he said.

"Our Cilacap refinery will be expanded by another 60,000 bpd within the next three years," he said.

Pertamina will also invest up to US$300 million to build reforming units at the Musi, Cilacap and Balikpapan refineries to meet gasoline demand.

The 10,000-12,000 bpd reformer unit at Musi in South Sumatra will be ready this year, he said.

To produce more gasoline and high value products in the new reformers, Pertamina will cease exports of naphtha and low sulfur waxy residue by 2000, he told the conference.

Pertamina also plans to upgrade its refineries to process MidEast crudes, Nawawi said. "This would allow us to process the high sulfur MidEast crudes and still enable us to export our sweet crudes," he said.

Pertamina projected that it could maintain its crude output at 1.5 million bpd at least until 2000 and at slightly over 1.0 million bpd by the end of the century.