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Jakarta Post

RI to seal deals with 4 foreign partners

  • The Jakarta Post

    The Jakarta Post

  /   Thu, December 4, 2014   /  11:30 am

As part of President Joko '€œJokowi'€ Widodo administration'€™s effort to modernize the country'€™s refineries to meet growing energy demand, Indonesia expects to hammer out agreements with China'€™s CNOOC Ltd., Saudi Aramco, Thailand'€™s PTT Pcl and a Japanese oil firm regarding oil sales and refinery investments in the country, a senior official with state oil and gas firm Pertamina says.

'€œWe are aiming for Dec. 10, coinciding with Pertamina'€™s anniversary, to sign MoUs [memorandums of understanding] with four investors for our refinery upgrades,'€ Pertamina'€™s new director of refining, trading and marketing, Ahmad Bambang, told reporters on Wednesday.

Ahmad said the refineries ready for the upgrade were those in Cilacap, Central Java; Balikpapan, East Kalimantan; Balongan, West Java; and Dumai, Riau.

According to Ahmad, Pertamina is in talks with the four investors to establish joint ventures to ensure crude supplies for Indonesia'€™s refineries.

'€œWe'€™re looking for partners to develop refineries and to guarantee the security of supply,'€ he said, adding that Pertamina would select partners who would '€œbring the maximum benefit to Pertamina and the state'€.

He added that the company aimed to upgrade its refinery capacities by two folds. However, he admitted that the upgrades would take around five years to complete.

The country'€™s economy has been suffering from a huge amount of imported oil and petroleum products as its domestic production continues declining while refineries to secure stocks are no longer running at its full speed.

Jeff Brown, the president of energy consulting firm Facts Global Energy, said the economics of building the refineries was challenging.

'€œPrivate players are not really building refineries anywhere right now. If we look around, they'€™re divesting. I suspect if you went to private players now and asked them if they would build a refinery in Indonesia, the interest would not be high. If the government chooses to do this, through Pertamina or through private players, its must offer incentives,'€ Brown said.

Indonesia has six refineries operated by Pertamina. In addition to those in Cilacap, Balongan, Balikpapan and Dumai, it also operates refineries in Kasim in West Papua and Plaju in South Sumatra.

The refineries have a combined capacity of 1.05 million barrels. The refineries cannot run at full capacity, pushing down the country'€™s fuel stock capacity to support consumption for only 18 days.

The figure is far lower compared to 10 years ago, when the country was able to support up to 31 days.

Earlier this year, the government secured a commitment from Iraq, one of the world'€™s biggest oil producers, to provide investment and crude oil for refinery projects in Indonesia. The new government recently struck a deal with Angola, in which its national oil company entered an agreement with Pertamina on the likes of crude supply and

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