Presidential decree on private refineries issued

JAKARTA (JP): The government has issued a presidential decree to encourage the development of privately owned refineries in order to fulfill the country's increasing demand for fuel.

According to the presidential decree dated July 31, private refineries can be set up by Indonesian companies after receiving permission from the President.

They may also develop refineries in partnership with foreign firms or with state-owned oil and gas company Pertamina.

Pertamina, according to the new decree, should get approval from the Governmental Board of Commissioners to buy stakes in privately owned refineries.

The decree states that Pertamina will remain the sole distributor of fuel in the domestic market, but private refineries can export fuel not needed by Pertamina.

The decree says private refineries are allowed only to handle the marketing of their non-fuel products on both the domestic and international market.

The decree also states that Pertamina will enter long-term contracts to buy fuel products from private refineries at international market prices.

Indonesia has long encouraged the private sector to build new refineries, but without much success because of a lack of concise guidelines.

To date, more than 30 companies have applied for licenses to build refineries in Indonesia. About dozen of them have received permission to build the facilities. However, none have begun construction.

Observers said the reasons why they were slow in building refineries were because Pertamina was not prepared to guarantee a crude oil supply and it could not commit itself to buying the fuel produced by private refineries.

Observers also said private refiners were not keen to export their products because the region was already well supplied by refineries in Singapore, South Korea the Middle East and Europe.

Pertamina currently operates eight refineries with a combined capacity of 989,500 barrels per day.

Pertamina's chairman, Faisal Abda'oe, recently said in a hearing with House of Representatives Commission VI for industry and mining that domestic fuel consumption grew 6 percent to 50.19 million kiloliters in 1996/1997, 22.5 percent or 11.34 million kiloliters of which was imported. (jsk)