State-owned energy giant Pertamina is making progress in its plan to jointly develop the new Tuban refinery in East Java with Russian oil firm Rosneft following the signing of a deed of incorporation for a joint venture to develop the US$15 billion facility.

Pertamina subsidiary PT Kilang Pertamina Internasional (KPI) controls 55 percent of the joint venture dubbed PT Pertamina Rosneft Pengolahan Petrokimia (PRPP), while Rosneft’s affiliate Petrol Complex Pte. Ltd. owns the remaining 45 percent.

The Tuban facility, slated for completion in 2024, will have the capacity to refine 300,000 barrels of oil per day (bopd) and produce 80,000 barrels of gasoline, 99,000 barrels of diesel Solar and 26,000 barrels of jet fuel on a daily basis.

“This project will strengthen Indonesia’s energy resilience and sovereignty as we would be able to increase the country’s fuel production in the future,” KPI director Achmad Fathoni Mahmud said after the signing of the agreement on Tuesday.

Within the first nine months of 2017, Indonesia imported 19.6 million kiloliters of fuel, 85.9 percent of last year’s total of 22.8 million kiloliters, according to the Energy and Mineral Resources Ministry.

PRPP will soon prepare an engineering package before it reaches the final investment decision (FID) and starts the construction process.

Furthermore, Pertamina will also team up with Saudi Arabian oil giant Saudi Aramco to upgrade the Cilacap refinery, also in East Java, with a total investment value of around $5.8 billion. The upgraded facility will have the capacity to refine 400,000 bopd, up from the current 348,000 bopd, once it is complete in 2023.

Pertamina petrochemical and processing megaprojects director Ardhy N. Mokobombang said earlier this month that the company had completed the feasibility study for the Cilacap project and aims to finish the land procurement process by year-end.

Unlike the Tuban project, Pertamina and Aramco will jointly conduct an engineering package before establishing a joint venture, in which Pertamina would also control the majority stake of 55 percent.

Pertamina expects the joint venture development agreement to be completed by the end of the year, with detailed arrangement on the crude supply and offtake agreement.

Pertamina was previously made the sole offtaker for fuel produced at the Tuban and Cilacap refineries. However, as the energy giant would risk a significant increase in its debt covenant since it would burden all the debt alone, it has since proposed readjustments for the two projects in which the offtake agreement would be in line with the shares portion of all stakeholders.

Pertamina is expected to closely monitor its financial state amid mounting tasks assigned in both the upstream and downstream sectors.

Pertamina saw its revenue climb by 17.8 percent year-on-year (yoy) to $31.38 billion between January and September. Nonetheless, its net income fell by 29.7 percent to $1.99 billion, driven by a 27 percent increase in its cost of goods sold and operating expense.

Commenting on Pertamina’s situation, Deputy Energy and Mineral Resources Minister Arcandra Tahar said that his ministry considered adjusting the price formula for fuel sold by the company.

Since April 2016, the government has maintained the price of Premium gasoline with a research octane number of 88 at Rp 6,450 (49 US cents) per liter and subsidized diesel Solar at Rp 5,150 per liter, forcing Pertamina to bear the burdens when the prices are below their real economic value.

“We are currently evaluating it. […] We’ll see whether there is room for the government to review the cost structures in the formula,” Arcandra said.

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