Indonesia needs to offer incentives to woo both local and foreign companies to invest in costly oil refineries, a senior government official has said.
Deputy Energy and Mineral Resources Minister Rudi Rubiandini said that for oil and gas business players, the sizeable investment to build refineries would not meet their desired internal rate of return (IRR).
Currently, according to Rudi, the rate of return of investment in the refinery business was less than 10 percent.
“With that, the government will need to attract the investors by offering incentives to boost the IRR for refinery business investments to a minimum of 12 percent,” he said over the weekend.
By definition, IRR is the average annual return received over the period of an investment. Investors consider a project attractive if the IRR is higher than the desired rate of return on an investment....