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Pertamina to make use of cheap product for fuel
Gas supply: Energy and Mineral Resources Minister Sudirman Said (third right), accompanied by Pertamina president director Dwi Sutjipto (right) and Jambi Governor Hasan Basri Agus (second right), lights up a gas stove during the launch of a gas network for residential areas in Thehok, South Jambi, Jambi on Saturday
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span class="inline inline-center">Gas supply: Energy and Mineral Resources Minister Sudirman Said (third right), accompanied by Pertamina president director Dwi Sutjipto (right) and Jambi Governor Hasan Basri Agus (second right), lights up a gas stove during the launch of a gas network for residential areas in Thehok, South Jambi, Jambi on Saturday. The gas network will supply 300 households. Coverage is expected to increase to 4,000 households this year. Antara/Wahdi Septiawan
Amid an overhaul of its processing facilities and the government's plan to launch new refinery projects, state owned oil-firm PT Pertamina is taking a bet with a new gasoline product, which will also mark the company's move to make use of less-valuable substances from its refineries.
The new product, to be called Pertalite, will have a Research Octane Number (RON) of 90 in specification, slightly higher than the widely used gasoline product Premium, which is RON 88.
Under its plan, Pertamina will produce Pertalite by blending a refinery product called naphtha with a high octane mogas component (HOMC).
Most of the naphtha, the RON of which is around 60 to 70, is currently exported. If Pertamina goes through with the plan to produce Pertalite, the low specification and cheap naphtha could be used to meet growing gasoline consumption in the domestic market.
'Our strategy is that with Pertalite, the imports of Premium can be reduced. We will make use of naphtha, which is usually exported at a low price,' Pertamina marketing director Ahmad Bambang said.
Indonesia, a former member of the Organization of Petroleum Exporting Countries (OPEC), has been struggling with declining crude oil production as its fields have been depleted. In addition to declining crude supply, the country's refineries are old and are only able to process less-complex oil.
Thus, to meet rising energy demand, the country has to import a significant amount of crude oil and its products, including gasoline. Currently more than half of the domestic gasoline demand is fulfilled by imports.
According to figures recently presented by Pertamina, the deficit of gasoline and diesel in the country will continue rising and touch around 64 million kiloliters of gasoline and approximately 35 million kiloliters of diesel fuel by 2025 (see table).
Ahmad said as Pertalite would need HOMC to be blended with naphtha, the imports of HOMC would increase. Imports of HOMC reach around 2 million barrels per month presently, which is expected to rise by a range of 500,000 to 1 million barrels a month to support Pertalite.
However, he said Pertamina was expecting that a project at its Cilacap refinery, called Residual Fluid Catalytic Cracking (RFCC), would be completed and would start operating by mid-year so the company would have additional capacity to produce higher-octane products.
Apart from the RFCC works, the Cilacap refinery is currently undergoing another development project called Proyek Langit Biru Cilacap (PLBC), which covers work on the revamping of the plant's platforming unit so that the refinery will be able to produce gasoline with RON 92 or more in specification.
Yet, it remains unclear what Pertamina's target for Pertalite is in the market as the company is still unsure whether the new fuel product will replace Premium, which has been considered environmentally unfriendly.
'We will observe the market. If Premium is still needed, we will continue producing it and make it available for society,' Pertamina president director Dwi Soetjipto said.
Premium used to be subsidized by the government. Since the beginning of the year, the subsidy was scrapped, yet the government continues to control the product by regulating the price given by Pertamina. For this April, the price of Premium is set below the market price, forcing Pertamina to bear a gap in price.
While Pertamina is trying to reform its refineries and pushes changes in the gasoline market, the government is planning to speed up the development of four new refineries in the country.
The Energy and Mineral Resources Ministry's acting director general for oil and gas, IGN Wiratmaja, said each of the four refineries would have a capacity of 300,000 barrels per day and were expected to be completed within 10 years. In past years, the country's plans to establish new refineries have been hampered by various issues, particularly fiscal incentives to make the projects more economical.
'For now, we will have a breakthrough and the refinery development will be a national priority program such as the 35,000 MW electricity program,' Wiratmaja said, adding that investment for each of the four refineries, which would be integrated with petrochemical projects, would be between Rp 100 trillion to Rp 120 trillion.
To date, the country has six refineries operated by Pertamina, with combined total oil processing capacity of over 1 million barrels per day. Under its master plan of development, Pertamina is working to boost capacity and modernize four of the six refineries.
However, even with higher capacity in its refineries, Pertamina estimates that it would still need new refineries to anticipate rising demand in the domestic market.
