Pertamina to build Tuban refinery with Sinopec
The Jakarta Post, Jakarta
State oil and gas company PT Pertamina will work with the China Petroleum & Chemical Corp. to build the country's tenth refinery in Tuban, East Java, Minister of Energy and Mineral Resources Purnomo Yusgiantoro says.
Pertamina and Sinopec, as the Chinese company is known, will sign a memorandum of understanding (MOU) during President Susilo Bambang Yudhoyono's visit to China later this week, Purnomo said on Sunday.
Pertamina's president director Widya Purnama said that construction was expected to start as soon as possible, depending on further discussions between the two companies.
"We hope to start this year, or next year at the latest," said Widya. He declined to give a date for the coming onstream of the refinery or the investment involved in the capital-intensive endeavor.
The refinery will have a processing capacity of between 150,000 barrels of crude oil per day (bpd) and 200,000 bpd, said Widya.
The President is slated to visit China for three days, starting on Wednesday. Purnomo said that the presidential entourage would visit coal-fired power plants located at the mine heads, which Indonesia is also planning on building.
In order to prevent fuel shortages in the future, Susilo has ordered the development of a refinery in Tuban, which will process oil from the Cepu block, located between East Java and Central Java, and the Jeruk field, south of Madura island.
Cepu, which will be operated by a joint venture between Pertamina and U.S. energy giant ExxonMobil, is expected to produce 170,000 bpd at its peak, while it is estimated that Jeruk will produce at least 50,000 bpd.
At present, Indonesia has nine large and small refineries with a total processing capacity close to 1 million bpd.
With domestic fuel consumption rising by some 7 percent per year, the government, through Pertamina, has to import some 300,000 barrels of crude oil and 400,000 barrels of fuel products per day to secure supply.
Indonesia suffered a major fuel crisis a month back, the effects of which are still being felt, after the country's fuel stocks dropped to less than 18-days supply, with premium gasoline down to only 12.7-days supply, compared to the ideal buffer stock of 22-days supply. The crisis was due to cash-flow problems at Pertamina and the government's difficulties in covering pay fuel subsidies amid soaring global oil prices.
The crisis prompted the current energy-conservation drive, which may see higher luxury taxes imposed on large-engined cars, as well as additional taxes on people owning more than one car, as a means of reducing fuel demand in the transportation sector.