State-owned oil giant Pertamina is scouting for new partners to develop multibillion dollar oil refineries in Indonesia after its previous partners, from Saudi Aramco to Oman’s Overseas Oil and Gas LLC (OOG), pulled out.
Pertamina recently signed deals with Taiwanese petrochemical giant CPC and a South Korean consortium to develop the Balongan and Tuban refineries respectively. It is eyeing other companies from various countries for other refineries, according to company spokesperson Fajriyah Usman.
The refineries, once completed, are expected to double Indonesia’s fuel output, enabling Pertamina to meet the country’s growing transportation fuel demand without raising fuel imports, a major contributor to the nation’s trade deficit.
“None of these refineries have been removed [from the National Strategic Projects] and all of them are on track,” Fajriyah said on June 5. Projects listed under the National Strategic Projects are eligible for government aid, providing an incentive for investment.
Indonesia has set a goal to process more resources domestically to boost export revenue and narrow the nation’s current account deficit, which continues to weigh down the economy. Fajriyah and Pertamina megaprojects and petrochemical director Ignatius “Lete” Tallulembang, the man who oversees the refinery projects, shared updates from the national strategic projects.
The five-year partnership between Saudi Arabia’s national oil company, Aramco, and Pertamina officially ended, allowing the latter to move forward in expanding its refinery in Cilacap, Central Java.
Lete said on June 5 that Aramco sent the partnership cancellation letter on April 21. The two companies had disagreed over the refinery’s value.
Thus, Pertamina sent on May 22 an offer to United Arab Emirates oil company Adnoc to replace Aramco in developing Cilacap. While waiting for a response, Pertamina plans to focus on developing the biofuel refinery facility within the Cilacap compound.
“The land is settled. We will look for opportunities to build what we can while waiting for a new partner,” he said.
Aramco declined to comment. Adnoc did not respond to queries from The Jakarta Post.
Development of the Bontang refinery in East Kalimantan has been put on hold while Pertamina looks for a new partner after its partnership agreement expired in December last year with Omani energy firm OOG. The project faced land acquisition issues.
“We will put in on hold. We will study the supply and demand again. Once that’s clear, we will talk to stakeholders,” said Lete.
Coordinating Maritime Affairs and Investment Minister Luhut Pandjaitan said in December last year his office was looking at UAE oil companies Mubadala and Adnoc to replace OOG in developing Bontang.
The Balikpapan refinery, which is the only project to have begun construction, reached 17 percent completion as of May 24, with pipes and valves on site, according to Pertamina.
Lete said the project, located in East Kalimantan with 5,300 workers under employment, would continue despite supply chain problems due to lockdowns around the world as countries work to contain COVID-19.
“Based on the current progress, the expected completion date is still as initially planned; mid-2023,” he said.
The first phase of the three-phase Balongan refinery expansion project in West Java would be completed in 2022, the earliest among all refinery projects, said Lete.
Pertamina signed on June 5 a deal with its Taiwanese counterpart CPC to develop the third phase of the Balongan facility, which is an $8 billion petrochemical plant slated for operation in 2026.
Pertamina president director Nicke Widyawati said Friday the project could help Pertamina become “a major petrochemical business player in the Asia-Pacific” over the next 10 years.
The facility is expected to produce 1 million tons of ethylene each year. Ethylene, like most petrochemicals, is predominantly used to make plastic products.
CPC vice president JZ Fang said the project’s total value was NT$250 billion (US$8.36 billion), as reported by Taiwanese media outlets.
He also said CPC and Pertamina would hold a 45 percent stake each with the remaining 10 percent reserved for potential investors.
Pertamina has continued to struggle with land-related issues over a refinery in Tuban, East Java.
The oil company secured all 328 hectares of land owned by the Environment and Forestry Ministry as of May 11 and completed 86 percent of its coastline restoration program as of May 23.
Lete said Pertamina had also purchased 37 percent of 384 ha of privately owned land in the project site with plans to purchase the remaining 63 percent by the third quarter.
“The engineering design goes on but was slightly affected by the [social restrictions], resulting in a slight slowdown in progress,” he said.
Pertamina signed on May 22 a memorandum of understanding (MoU) with Indonesian state construction firm PT Nindya Karya and a South Korean consortium to look into a $1.5 billion refinery expansion in Dumai, Riau.
“This is still a very early stage deal. It’s a non-binding MoU,” Lete said on Friday.
He said Pertamina was also in talks with United States energy firm ConocoPhillips to produce a methanol gas processing facility in Dumai.
The Plaju refinery, which is set to specialize in producing palm oil-based biofuels, is at its basic engineering design phase.
Pertamina also plans to experiment producing bioavtur (aviation fuel), biogasoline and biodiesel in the Plaju refinery, located in South Sumatra, this year.
“We will conduct efficiency and modernization measures but we will focus first on developing the biorefinery,” said Lete.
Pertamina and Italian oil company Eni recently ended their partnership to develop the Plaju refinery. The two companies faced complications related to the European Union’s palm oil standards, which are more stringent than Indonesia’s standards due to deforestation concerns.