The new grassroots refinery, which will have a capacity of 300,000 barrels per day (bpd), will become the country’s largest refinery because it will be integrated with a petrochemical plant. The investment for the new refinery is expected to reach US$10 billion.

Pertamina president director Nicke Widyawati said the new Bontang refinery would produce gasoline, aviation turbine fuel, and liquefied petroleum gas for both local and overseas markets

OOG chairman Khalfan Al Riyami added that the fuel products to be produced by the Bontang refinery would not only be sold in Indonesia, but also to neighboring countries, like Australia.

“Part of the products will be exported because certain products that are not needed by Indonesia could be exported to other countries,” he said during a visit to Jakarta recently.

OOG holds a 90 percent stake in the Bontang refinery with Pertamina holding a 10 percent golden stake. The Omani company expects to complete the feasibility study for the construction of the refinery this year.

“A bankable feasibility study [BFS] usually takes six months to complete. We then have to conduct the FEED [Front End Engineering Design], which could take two to three years. It is only after those phases that we can enter the construction phase,” he said, adding that the costs for the FEED alone could reach $180 million.

The Bontang refinery is one of two new refineries to be built in Indonesia. The other one is a new grass roots refinery in Tuban, East Java. The Bontang refinery is scheduled to begin commercial operation in 2026.

The framework agreement for the Bontang refinery was signed by OOG and Pertamina in December last year.

Pertamina’s Nicke said OOG was picked as a partner due to its ability to finance the project. It is also expected that by the end of this year a joint-venture (JV) between Pertamina and OOG will be established to run the refinery.

Regarding the progress of the JV, OOG’s legal adviser, Constant Pongola, said negotiations were still under way. “Based on the agreement, the deadline to set up the JV is by the end of this year, so we still have a lot time to discuss it,” he added.

Meanwhile, when asked about Pertamina’s intention to increase its stake in the Bontang refinery from only 10 to up to 30 percent, Constant said the door was still wide open. “It’s still under discussion, so we haven’t decided anything yet. Currently, it’s still 90:10 for the first stage. However, there’s still an opening for Pertamina on its rights to increase the stake.”

Khalfan said the Omani company was also seeking other partners to jointly build and run the Bontang refinery including Japan’s Cosmo Oil Company, which had previously expressed an interest in joining the project.

“There are two types of partners in terms of equity and construction,” he said after the signing of a memorandum of understanding with two local companies in Jakarta recently.

In construction, the Omani company would cooperate with PT Meta Espy, which is an engineering, procurement and construction (EPC) company and publicly listed construction company PT Sanurhasta Mitra Tbk (MINA).

Both companies are entitled to sub-projects on supporting facilities valued at up to $3 billion, such as building the power plant, piping, fabrication, water treatment and other construction. Khalfan said OOG would cooperate with a number of companies from Europe in providing the technology infrastructure for the Bontang refinery project.

Indonesia is currently in the process of upgrading its four existing refineries and building two new ones — one in Bontang and another in Tuban. The expansion program is expected to more than double Indonesia’s refining capacity to 2.07 million bpd by 2025 from only 1.05 million bpd at present.

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