State-owned energy firm Pertamina has decided to include domestic investors, in addition to the usual list of international firms, in the upcoming screening of potential partners for the construction of its new refinery in Bontang, East Kalimantan. Pertamina processing and petrochemical megaproject director Rachmad Hardadi said the decision to allow domestic players to partake in the project’s expose, scheduled for Feb. 28, was intended to increase the use of local industrial content in the construction ofthe refinery.
ln previous projects, such as the Tuban refinery construction in East Java, Pertamina stipulated that its strategic partner should have a crude oil reserve of 50 years, which was one of the reasons it granted the role to Russia’s Rosneft Oil Company. However, Rachmad said that Pertamina now had a more optimistic view that crude oil would be easily available as long as investors had sufficient capital, opening up opportunities for a consortium of local firms to join the Bontang project.
“[Our partner] may end up being a consortium, and not just a single firm. This will provide a better chance for domestic investors to contribute to this project, especially since we want to high-light the importance of local industrial content,” he said during a press conference on Friday.
The Bontang refinery is expected to be completed by 2023 with a production capacity of 300,000 barrels of oil per day (bopd), with all of the gasoline produced to be absorbed domestically while there will be a 35 percent excess of diesel and jet fuel, which Pertamina hopes to export. The construction of the facility will need an investment of between US$ 8 billion and $12 billion, much lower than the initial estimate of $15 billion. Pertamina hopes that the new refinery will be integrated with a nearby liqueied natural gas (LNG) processing facility belonging to Pertamina subsidiary PT Badak NGL.
The Bontang project recently underwent a scheme change that saw Pertamina appointed to Carry out the project as opposed to the previous public-private partnership (PPP) scheme. So far, seven out of 37 invited companies have confirmed their attendance at next Tuesday’s project expose, and around 50 other potential investors have signed up to attend. Pertamina hopes to have selected a partner by the end of April. The partner will have to submit an account commitment of $5 million initially and another $10 million in the first quarter of 2018.
The construction of the Bontang refinery is part of Pertamina’s larger plan to double its refined fuel production capacity within the next decade in order to fulfil national demand and cut down on the high volume of refined fuel imports. Pertamina has predicted that the country will be self-sufficient by 2023 if it manages to complete the construction and upgrades of five refineries with a total production capacity of 1.8 million bopd from the current 1 million bopd.
lt hopes to further boost the capacity to 2 million bopd by 2025 with the upgrade of a sixth refinery in Dumai, Riau. At present, the country’s refineries e all of which belong to Pertamina -are only capable of producing around 830,000 bopd, a little over half of the current refined fuel demand. Pertamina projects that by 2023, refined fuel demand will reach around 1.07 million bopd, less than the national production capacity.
Meanwhile, ReforMiner lnstitute researcher Pri Agung Rakhmanto said that Pertamina’s decision to increase the use of local industrial content in the Bontang project was a good idea so long as the firm could guarantee the quality of the supply. Furthermore, procuring local industrial content may help speed up the construction process as not as much equipment would have to be imported.
“If Pertamina has already announced that it would like to use more local content then they need to ensure that local manufacturers can provide it at a sufficiently high quality and on time in order to prevent delays or safety problems,” he told The Jakarta Post on Friday
Jakarta Post, Page-13, Saturday, Feb, 25, 2017
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