Tuban to get new refinery to save fuel shortages

The Jakarta Post, Jakarta

To prevent future fuel shortages, the government will build the country's 10th refinery in Tuban, a northern coast town of East Java province.

"The government has decided to build a refinery in Tuban if oil exploration and exploitation can be done in Cepu, Central Java, and in Jeruk field, south of Madura island," President Susilo Bambang Yudhoyono announced at the presidential office on Monday.

By developing the refinery, he explained, state oil and gas firm PT Pertamina would also have more fuel depots and in the end it would improve domestic fuel distribution.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said the refinery would have a capacity of between 150,000 and 200,000 barrels of oil per day (bpd).

Such a capacity is deemed sufficient to process output from Cepu, which is expected to reach 170,000 bpd at its peak, and from Jeruk, estimated to produce at least 50,000 bpd of crude oil.

At present, Indonesia has nine big and small refineries with a total processing capacity close to one million bpd. With domestic fuel consumption rising by some 7 percent per year, the government through Pertamina currently has to import approximately 300,000 barrels of crude oil and 400,000 barrels of fuel products each day to secure supply.

Analysts have long urged the government to build more oil refineries. However, the cash-strapped government has said that it is having difficulty funding capital-intensive endeavors as big as a refinery.

House of Representatives Commission VII for energy and mining recently decided to encourage refinery development and allocate funds for such projects in state budgets in following years.

The President said that some 17 preliminary licenses had been issued for private parties to construct refineries. They are yet to materialize as the subsidy system in the country translates into a small fee for refiners and subsequently low income.

The Downstream Oil and Gas Regulatory Agency (BPH Migas) has requested lower import duties on imported capital goods, such as machinery and materials, to build expensive facilities such as refineries and fuel depots across the archipelago.

The Ministry of Finance is investigating the possibility.