Pertamina, the state oil and gas company, plans to spend $1.5 billion during the next four years to revamp its refinery in Balikpapan, East Kalimantan, a company executive said.
Chrisna Damayanto, Pertamina’s processing director, said the facilities at the Balikpapan refinery, Unit V, currently processed 260,000 barrels of crude oil per day and were only able to accept sweet crude oil, which is more expensive than other types of petroleum that contain a higher level of sulfur content.
“If we have the ability to process sour crude, we will save $6 to $7 per barrel. The investment needed to modify the refinery in Balikpapan will be around $1.5 billion” Chrisna said during the weekend.
Pertamina is now conducting a study of the renovation project.
The state-owned company raised $2.5 billion on June 8 from the sale of its global bonds and will use some of the proceeds to help finance the project.
The Balikpapan refinery currently produces fuels including lower-octane Premium gasoline, higher-octane Pertamax fuel, kerosene as well as marine gas oil.
Chrisna said that Pertamina planned to upgrade all its refineries and establish a Pertamina Refinery Corporation, a subsidiary that would specifically manage the business of refineries and crude processing.
The director said that with Premium imports currently at 400,000 barrels per day, the need for new refineries was pressing. If Pertamina wants to produce all fuel locally, there is a need for three to four new refineries.
“Indonesia has become dependent on other countries. Just imagine if the political situation becomes unstable in Singapore or South China. Indonesia will certainly collapse,” Chrisna said.
He said Pertamina needed to keep up its momentum with its plans to build two new refineries in Balongan Baru and Tuban, East Java, each with the facilities to process 300,000 barrels of oil per day. Each project will need an investment of around $20 billion. Pertamina is speaking with investors, such as the Kuwait Petroleum Corporation and Saudi Aramco Asia Company.
“We will certainly look for partners. We will apply a strategic partner system that can provide technology, funding and also sources of crude for processing,” Chrisna said.
He added that if Pertamina and Kuwait Petroleum were not able to reach a deal, then it would approach other partners such as Chevron or Shell.
Pertamina has six oil refineries, including Tuban, Cilacap in Central Java, Dumai in Riau and Balikpapan.