State oil and gas firm PT Pertamina plans to build two new refineries and expand its biggest existing one to meet domestic demand and cut imports.
President Bambang Susilo Yudhoyono said on Thursday the country produced a great deal of oil but still had to import some to meet local demand for refined products because of lack of refineries.
“We still import fuels in a large volume. Citing (the country’s) daily oil production, whether it is for export, or for own consumption, it will be more efficient for us to produce oil for our (own benefit),” he said at Pertamina’s headquarters after a meeting.
“Therefore, (Pertamina) will build three refineries within three to five years,” he added.
Pertamina corporate secretary Toharso explained that two of the planned refineries would be new ones - located in Bojonegara, Banten, and in Tuban, East Java - while the other one would be an expansion of the existing, biggest refinery in Balongan, West Java.
“The total capacity of the three planned refineries will be 400,000 barrel per day (bpd),” he said.
Pertamina director for processing Rukmi Hadihartini earlier said Pertamina would start building the Tuban refinery after it finished building the Banten refinery, which was scheduled for completion in 2012.
The Tuban refinery, she said, would have a capacity of 200,000 bpd.
The Balongan refinery, which is one of seven oil refineries owned by Pertamina, alone has a production capacity of 125,000 bpd.
According to Pertamina data, 226.1 million barrel of fuels were produced and 138.7 million barrel were imported in 2007, while the country produced 227.2 million barrel of fuels and imported 142.1 million barrels in 2008.
For the time being, Toharso said Pertamina was still looking for partners for crude oil supply and financing for the new refineries, while it had yet to calculate the total investment actually needed.
“We’re considering an Iranian company to become our crude oil supplier,” he said. “But the process is progressing slowly and we’re trying to expedite this.”
Triharso also said Pertamina would consider proposing to the government to be allowed to fund the projects from a portion of the government’s dividends.
The projects, he said, had long been planned but yet to come into reality because of the crude oil supply and financing issues.
President Yudhoyono said investors tended to become reluctant to join in the projects because of, among other things, small margins and the uncertainty of the market.
“Therefore we need a proper structure of cost and benefit and need to give investors a guarantee about the market. I told them that I guaranteed the market as demand continued to rise.”
He also said the government might provide investors with fiscal incentives to attract them.
“(Profit) margins in the development of these refineries are not too big. Therefore, fiscal incentives are necessary to attract investors,” said Yudhoyono.
“I want this fiscal incentive plan to be discussed immediately.”
Likewise, Pertamina financial director Ferederick S.T. Siahaan also said a raft of incentives would be useful for investors to realize the capital-intensive refinery projects.
For instance, he said, the Bojonegara refinery needed at least $4.2 billion in investment.
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