Although costly, RI needs to build more refineries: SBY

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Indonesia still needs to build more fuel refineries to ensure the country’s future energy security even though the construction of such refineries will be very costly, President Susilo Bambang Yudhoyono says.

With more refineries, Indonesia would be able to reduce fuel imports to meet the surging fuel consumption in the country, the President said. He, therefore, urged relevant government offices to support the ongoing plan to build at least three additional refineries in the country.

“It requires considerable investment to build a refinery, while its profit margin is not so large. However, regardless of those considerations, we still need to have additional refineries,” Yudhoyono told a press conference after a Cabinet meeting earlier this week.

The President said he had talked with all the relevant ministries and officials on speeding up the country’s current refinery projects and ensuring national energy security. “We cannot always rely on the international market for oil supplies as it won’t necessarily fulfill our domestic fuel demand,” he added.

The state-owned energy firm, PT Pertamina, currently operates six refineries with a combined processing capacity of 1.03 million barrels per day (bpd) of crude oil, but they only produce 677,000 bpd of refined fuel.

These refineries are located in Balikpapan, East Kalimantan; Balongan, West Java; Cilacap, Central Java; Dumai, Riau; Kasim, West Papua; and Plaju, South Sumatra. The newest refinery is Balongan, which was built in 1994.

The Energy and Mineral Resources director for oil and gas, Evita Herawati Legowo, explained that the government was currently looking at three potential refinery projects.

The government plans to construct one of them with a capacity of 300,000 bpd, using funds allocated from the 2013 state budget.

“We hope the House of Representatives gives its approval to disburse the funds,” she said.

She said the funds needed would amount to Rp 90 trillion (US$9.54 billion), which would be used on a multiyear scheme, targeting completion in 2019. Regarding the refinery’s location, Evita hinted that it would likely be in Sumatra.

The two other refineries, each with 300,000 bpd capacity, would be constructed by PT Pertamina in collaboration with foreign investors.

Pertamina is expected to construct a refinery in joint cooperation with Kuwait Petroleum. The new refinery will be built in Balongan, West Java, near the existing refinery. However, Evita said the government would likely alter the project’s location to East Kalimantan as there were difficulties with finding a suitable area for the plant.

“We are considering the availability of land, which needs to be a minimum of 500 hectares. In Balongan, we would need to do some dredging and other things first before constructing could begin,” she said.

Pertamina also plans to cooperate with Saudi Aramco to build a refinery in Tuban, East Java. The project is now undergoing a feasibility study.

Separately, it is expected that Pertamina will take over PT Trans Pacific Petrochemical Indotama (TPPI) due to debt problems. As reported earlier, TPPI owes $406 million to Pertamina in the form of a Product Delivery Instrument.

Pertamina’s finance director, Andri T. Hidayat, said Pertamina would give the TPPI one final chance to pay off its debt; otherwise, Pertamina would take over TPPI’s assets including its refinery in Tuban, East Java. “We will wait until Aug. 16 and see what happens,” he said.

— JP/Rabby Pramudatama