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Jakarta Post

Indonesian refinery projects prone to delays, cancellations: BMI Research

  • Viriya P. Singgih

    The Jakarta Post

Jakarta   /   Mon, March 5, 2018   /   10:27 am
Indonesian refinery projects prone to delays, cancellations: BMI Research Two workers talk at an oil refinery in Cilacap, Central Java, owned by state-owned energy company Pertamina in this undated picture.. (Antara/Idhad Zakaria)

Indonesia’s ambitious oil refinery development plans are prone to delays and even cancellations due to the country’s notorious policy flip-flop, according to global think tank BMI Research, a unit of Fitch Group.

State-owned energy giant Pertamina is currently in the process of upgrading its four existing refineries and building two new ones in a bid to boost Indonesia’s refining capacity to 2.07 million barrels of oil per day (bopd) by 2025 from only 1.05 million bopd at present.

The total investment for these projects is expected to reach around US$45 billion.

However, BMI Research said funding issues, regulatory uncertainties and bureaucratic headwinds had limited the projects’ progress to date and might lead to delays or cancellations in the future.

“Indonesia's regulatory and bureaucratic landscape remains among the most complex in the region, and we believe will continue to stand in the way of meaningful project progress over the coming years,” BMI Research said in a report published in late February.

Pertamina has teamed up with Saudi Arabian oil giant Saudi Aramco to upgrade its Cilacap refinery, and with Russia’s Rosneft in developing the new Tuban refinery. Both are located in East Java.

However, Pertamina announced in June last year that the completion date of the Cilacap and Tuban projects, both of which were initially slated for 2021, had been extended to 2023 and 2024, respectively. This was because Pertamina needed to renegotiate its marketing agreements with Aramco and Rosneft. (bbn)