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Pertamina projects stall amid policy flip-flops, refinery blaze
Even though Pertamina has made assurances that the incident would not disrupt fuel supply and distribution, we cannot help but be concerned about the damage incurred on the downstream oil industry.
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A farmer works in his field as smoke billows from a fire at Balongan refinery, operated by state oil company Pertamina, in Indramayu, West Java on Tuesday. (AFP/Agus Sipur)
T
his is really bad news for energy, an extremely vital component of the economy. While Pertamina’s four refinery upgrade projects and two greenfield refinery projects launched in 2014 have been delayed by several years or even canceled, an inferno fire gutted the state-owned oil and gas giant’s newest refinery at Balongan, West Java, early Monday morning.
Even though Pertamina has made assurances that the incident would not disrupt fuel supply and distribution, we cannot help but be concerned about the damage incurred on the downstream oil industry.
Already Southeast Asia’s largest net importer of crude oil, gasoline and gasoil at an annual volume of almost 1 million barrels per day (bpd), Indonesia may have to import more refined fuel until the Balongan refinery resumes production at its 125,000 bpd full capacity.
Pertamina’s six old refineries, which have a combined capacity of 1 million bpd, are able to produce only 850,000 bpd of refined fuel, barely half of national demand. Importing more fuel means stronger pressures on the balance of payments and larger drain on the foreign exchange reserves.
The Balongan refinery, which came on stream in 1994, was the last plant Pertamina built. Many new greenfield and expansion projects that have been planned since then have suffered cancellations or prolonged delays due to the country’s notorious policy flip-flops and bureaucratic barriers.
After Joko “Jokowi” Widodo became president in late 2014, he enacted a 2015 decree designating four refinery upgrades and two greenfield refineries as national strategic projects. Scheduled for completion by 2025, these six projects worth US$45 billion in total investment would double Pertamina’s refining capacity to 2.1 million bpd.
Read also: West Java oil refinery blaze rages for a second day
