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nfrastructure project financing guarantee agency PT Penjaminan Infrastruktur Indonesia (PII) is in talks over a plan to cover financial loss risks for the construction of an oil refinery in Bontang, East Kalimantan, estimated to cost between US$10 billion and $12 billion.

The Bontang refinery, which will be Indonesia's seventh oil refinery, will have a total production capacity of 300,000 barrels per day (bpd) of refined fuel.

That is expected to take up the country's oil production capacity to 1 million bpd.

The refinery will be built in Sigendis subdistrict on 700 hectares owned by state-owned oil and gas firm PT Pertamina.

PII operational director Yadi J. Ruchandi said that the agency, which is also called the Indonesia Infrastructure Government Fund (IIGF), was asked to guarantee and evaluate the project's feasibility study results.

'We are currently conducting an initial assessment,' Yadi told reporters on the sidelines of the Indonesia Green Infrastructure Summit 2014 on Wednesday.

'This is still in its initial stage. We hope to cover the project's financial risk,' he added.

Yadi said the evaluation conducted by PII was aimed at ensuring that the project was feasible.

PII's coverage of Bontang oil refinery's financial loss risks should be able to ease the minds of investors seeking loans from financial institutions to fund their investment plans at the refinery, according to him.

'It will all depend on the government, but we are ready to assist,' Yadi said.

Iraq has stated its commitment to provide 300,000 bpd of oil for 20 years to the Bontang oil refinery when its construction is completed.

The Middle Eastern country has also agreed to provide funds for the refinery's development.

Yadi said that this year, the agency also aimed to finalize funding guarantees for three other projects in the pipeline.

Among the projects are the Umbulan tap water plant in Central Java, a potable water project in Lampung and a coal-fired power plant in South Sumatra. 'For each project, we will guarantee between Rp 1.5 trillion [US$129 million] to Rp 2 trillion of the [project's] total investment value,' Yadi said.

Other projects also in the pipeline, Yadi said, were an express train connecting Halim Perdanakusuma Airport in East Jakarta and Soekarno-Hatta International Airport in Banten, toll roads projects and seaport projects.

Since the establishment of the agency in 2010, Yadi said that PII had only finalized a funding guarantee scheme for one project, the 2x1,000 megawatt steam-fueled power plant (PLTU) in Batang, Central Java.

The project, which at completion would be Southeast Asia's largest steam-fueled power plant, is currently stalled due to land acquisition issues.

PII guarantees private investor investments in infrastructure projects under the public and private partnership (PPP) scheme.

The agency guards against risks that could arise due to delays in the issuance of licenses, land acquisition issues and changes in government policies.

PII has been funded by the state budget as well as the World Bank.

Yadi, however, did not disclose the amount of capital required by the agency this year, nor the allocated state budget for the agency's capital this year.