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Govt seeks to end fuel imports by 2026, expects Pertamina to boost production

The Energy and Mineral Resources Ministry expects Pertamina to complete five multi-billion dollar refinery projects between 2022 and 2026

Norman Harsono (The Jakarta Post)
Jakarta
Mon, November 23, 2020

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Govt seeks to end fuel imports by 2026, expects Pertamina to boost production

T

he government has encouraged state-owned oil giant Pertamina to increase domestic oil production while the country reduces consumption in order that Indonesia can stop importing the commodity by 2026 in an effort to curb the oil and gas trade deficit.

The Energy and Mineral Resources Ministry expects Pertamina to complete five multi-billion dollar refinery projects between 2022 and 2026. The refineries will produce oil-based fuel and biofuel.

“By 2026, fuel demand and production will be equal,” the ministry’s freshly appointed oil and gas director general, Tutuka Ariadji, told lawmakers at a hearing in Jakarta on Nov. 16.

The government is on a campaign to lower Indonesia’s oil and gas trade deficit, which undermines the rising overall trade surplus recorded by the country so far this year.

Indonesia’s oil and gas imports amounted to US$1.08 billion in October this year, down 8 percent from the previous month and a much steeper drop of 38.54 percent from October last year, when the country was still coronavirus-free, Statistics Indonesia (BPS) data shows.

On the supply side, the government expects Pertamina’s refining subsidiary, PT Kilang Pertamina Internasional (KPI), to finish expanding its refineries in Balongan, West Java; in Cilacap, Central Java, and in Balikpapan, East Kalimantan, as well as to finish building its new refinery in Tuban, East Java.

Among the four projects, the Tuban project is aimed at filling the largest gap in fuel supply once it is operational in 2026, according to the ministry’s calculations.

The Tuban facility is expected to boost Pertamina’s refining capacity by 300,000 barrels per day (bpd), which is more than the combined, expanded capacities of the other three projects at 177,000 bpd.

KPI corporate secretary Ifki Sukarya confirmed the company’s plan to begin constructing the Tuban refinery in 2022 and completing it in 2026.

“Today, we are still at the land-preparation phase for 380 hectares of community-owned land. We expect to finish paying for the land this year,” he told The Jakarta Post via text message on Nov. 20.

KPI president director Ignatius “Lete” Tallulembang told reporters in June that the Tuban project was still in the land-acquisition process expected to be completed this year.

The project making the most progress among the four is the Balikpapan refinery, which had reached 22.26 percent completion as of Oct. 22, Pertamina stated on Nov. 1.

Balikpapan is expected to fill the second-largest gap in fuel supply once completed in 2023. This facility is slated to increase Pertamina’s refining capacity by 100,000 bpd.

Economic Research Institute for ASEAN and East Asia (ERIA) energy economist Alloysius Joko Purwanto noted that “the biggest challenge” for Pertamina in pursuing the efforts was producing a low-emission, low-cost fuel that complied with the Environment and Forestry Ministry’s emission caps without burdening the state budget.

“The biggest challenge is not quantity, such as raising production capacity, but quality,” said Joko on Nov. 17.

On the demand side, the ministry wants to lower domestic gasoline and diesel consumption by swapping them with biogasoline and a 30 percent palm oil-mixed biodiesel (B30).

Joko noted that 75 percent of Indonesia’s fuel imports came from imported gasoline and thus, “the most important thing is reducing gasoline imports.”

But while the government has successfully rolled out a B30 biodiesel, it has failed to roll out molasses-based biogasoline, missing a deadline stipulated under existing regulations.

The difficulties with producing biogasoline were threefold: high sugarcane production costs, unstable molasses prices and limited production capacity, wrote Joko on Oct. 10.

Nonetheless, the energy ministry expects Pertamina’s biofuel-only "green refinery" in Plaju, South Sumatra, to begin developing biogasoline in 2022 and producing biodiesel in 2024.

KPI’s Ifki also reaffirmed the company’s plan to begin constructing the green refinery in 2021 and have it operational by 2024. The refinery would convert 20,000 barrels of crude palm oil each day into biofuel. He did not specify biogasoline.

“Right now, we are doing engineering work where we expect to finish the basic engineering design at the end of 2020,” he said.

The government had also planned to escalate into B40 biodiesel in July 2021 but the energy ministry’s renewables director general, Dadan Kusdiana, said such a realization was unlikely.

“B40 will not be ready until at the earliest the first half of 2021,” he said on Nov. 16. “B40 is challenging and heavier from the financial support aspect.”

The energy ministry also expects Pertamina to begin producing a homegrown biodiesel catalyst, namely the Red and White catalyst, starting 2022. The oil and gas giant, state-owned fertilizer producer PT Pupuk Kujang and the Bandung Institute of Technology (ITB), which invented the catalyst, previously signed a deal to finish building a Red and White catalyst factory in West Java in 2021.

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