RI needs US$15 billion in refinery investment

Fabiola Desy Unidjaja, The Jakarta Post, Jakarta

Indonesia will need about US$15 billion in investment for the construction of four oil refineries over the next four years in order to cut down on crude oil imports.

Minister for Energy and Mineral Resources, Purnomo Yusgiantoro, said on Tuesday during a discussion hosted by the Indonesian Chamber of Commerce and Industry (Kadin) that current oil production has been insufficient to meet increasing demand in the domestic market.

Continuing to import crude oil would only burden the state budget, he added.

"We have another choice, and that is to improve infrastructure in the oil and gas sector, including the construction of the four oil refineries, transportation systems, and storage systems for trading purposes."

Purnomo said that each oil refinery would cost around $1 billion, but that it was important to minimize crude oil imports, he said.

Due to the large sums of money required for infrastructure development, the government welcomed private sector participation in the projects.

The country's domestic demand for fuel has increased by 7 percent in average in the past five years but domestic oil production has been on the decline, with the country only producing one million barrels per day.

Indonesia must therefore import crude oil in large quantities to fulfill demand.

Purnomo also spoke on state oil and gas company Pertamina's preparations in ending its public service obligations by November 2005.

He said his ministry has issued some preliminary permits to allow investors to begin fuel processing.

"However, we will not issue permanent permits to them if the investors fail to complete several requirements within a two-year time period."

By November 2005, the government will open the door for the private sector to operate gas stations nationwide, a sector presently monopolized by Pertamina.

Purnomo said that only a few investors have started to build gas stations.