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Pertamina Courts Saudi Oil Company
December 29, 2011

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Indonesia’s state-controlled energy company Pertamina will cooperate with Saudi Arabian Oil Company to build a Rp 80 trillion ($8.8 billion) oil refinery in Tuban, East Java, an executive said on Thursday.

Edi Setianto, processing director at Pertamina, said he expected the two companies to sign a memorandum of understanding on the new refinery by the middle of next month.

The Tuban refinery is expected to have a processing capacity of 300,000 barrels a day when completed. It would produce 8.29 million kiloliters of gasoline annually, consisting of 3.93 million kiloliters of low-octane Premium gasoline, 2.68 million kiloliters of diesel and 1.68 million kiloliters of jet fuel.

After the memorandum of understanding is signed, the Saudi company, Saudi Aramco, will conduct a feasibility study that is expected to take a year to finish.

“We hope it [can be done] sooner,” Edi said.

He added that President Susilo Bambang Yudhoyono had asked Pertamina to explore possibilities for cooperating with the Saudi oil company.

While the plan is for the refinery to be up and running by 2018, Edi warned that a number of obstacles could slow the project.

“There could be questions about incentives, land acquisition and other issues,” he said.

Saudi Aramco had not yet asked about incentives for its involvement in the project, he said, but that could change if the feasibility study indicated the commercial prospects were not very good.

He said the project represented a major opportunity and would involve a massive investment by Saudi Aramco.

“They have the option [to invest] in other countries such as China and Vietnam. So if Indonesia is not serious, they could just move somewhere else,” Edi said.

Pertamina also plans to build an integrated refinery in Balongan, West Java, with a processing capacity of 300,000 barrels per day. The completion date is 2017.

The Balongan refinery would produce 9.6 million kiloliters of gasoline, consisting of 3.86 million kiloliters of Premium, 4.55 million kiloliters of diesel and 1.19 million kiloliters of jet fuel.

Pertamina hopes to stop importing gasoline once the two refineries are up and running.

Antara