PT Pertamina and Japan’s Mitsui & Co. Ltd have dropped a joint venture to upgrade an oil refinery in Cilacap, Central Java, over “disagreements on the business model”, the state oil and gas company announced Thursday.
“We have decided not to cooperate [with Mitsui] in the project,” said Heru Sutrisno, senior vice president for business development at Pertamina’s processing directorate.
“This will be a win-win solution for both companies.”
Pertamina has since last year attempted to renegotiate its share in PT Pertamit Processing, a joint venture created with Mitsui for the project in March 2008.
Mitsui controls an 80 percent stake in the joint venture, while Pertamina holds the rest.
In November 2009, Pertamina sought to increase its holding in Pertamit to a majority stake, but to
no avail.
Pertamina spokesman Basuki Trikora Putra declined to say whether the company’s demand for a renegotiation was the reason for the split.
He only said both companies had failed to agree on several key issues in the project’s business plan.
“Pertamina and Mitsui will li-
quidate Pertamit Processing,” Basuki added.
Pertamina’s Cilacap refinery has a processing capacity of 340,000 barrels of oil per day (bpd).
In its initial deal with Mitsui, Pertamina planned to add a residue fluid catalytic cracking (RFCC) unit that would allow the refinery to produce liquefied petroleum gas (LPG), gasoline and propylene more economically.
With Mitsui now out of the picture, Heru said Pertamina would go ahead with the refinery upgrade project on its own.
“We’ll do the project alone,” he said.
“After ending all the issues with Mitsui, we’ll be ready to open the engineering and procurement [EPC] tender for the project.”
Heru added Pertamina would finish the project on schedule.
The RFCC unit is expected to be onstream by 2013, Pertamina’s president director Karen Agustiawan said in November last year.
Adding the RFCC unit is expected to cost US$1.5 billion, reportedly to be financed by the Japan Bank for International Cooperation (JBIC).
Basuki, however, said the JBIC would not be on board.
“We have no more links to the JBIC,” he said.
“Pertamina will go the project alone.”
Besides the Cilacap refinery, Pertamina operates five other refineries: in Balikpapan with a processing capacity of 260,000 bpd; Dumai with 170,000 bpd; Plaju with 110,000 bpd; Balongan with 125,000 bpd, and Kasim with 10,000 bpd.
With current domestic fuel production still unable to meet demand, Pertamina is preparing more refinery projects.
This includes a fuel refinery to be built in Bojanegara, Banten province, for which Pertamina has established a joint venture with Iran’s Oil Refining Industries Development Company and Malaysia’s Petrofield to construct the refinery.
