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Refinery Projects will remain in demand



The government is still optimistic that the oil and gas refinery project will still be attractive to foreign investors, even though a number of partners who have previously joined chose to resign due to the fluctuating pressure on the black gold price.

Overseas Oil and Gas LLC

One of the partners who have resigned is Overseas Oil and Gas LLC based in Oman, from the Bontang Refinery project in East Kalimantan Province, so that the project is currently suspended. In addition, Saudi Aramco has also recently withdrawn from the Cilacap Refinery project in Central Java Province.


Deputy for Maritime Sovereignty and Energy Coordinating Ministry of Maritime and Investment Coordinating Ministry Yudhi Sadewa said he would investigate the withdrawal of Pertamina's partners in the Bontang Refinery project.

He acknowledged that low oil prices would make several countries withhold investment in advance. However, that does not mean that no one is interested in investing in a national refinery project. As an illustration, over the past year, the price of Indonesian crude oil (ICP) reached its lowest point in April 2020 at the US $ 20.66 per barrel and in May 2020 at the level of US $ 25.67 per barrel. Last year, the average ICP was the US $ 62.37 per barrel.

Purbaya revealed that Chinese investors were also interested in the refinery project in Batam, Riau Islands (Riau Islands).

"China will invest the US $ 5 billion to the US $ 6 billion in Batam. The Riau Islands ask for our support to support the investment, "he said.

However, he was unable to provide details on the capacity of China's investment plans in Batam.

"They say they can also go to the international market, therefore the choice is in the Riau Islands near the international shipping lane," he explained.

Purbaya is still optimistic that refinery investment will continue if it is properly guarded. He added that Abu Dhabi was also interested in building refineries in Balongan, West Java Province, and Dumai, Riau Province.

"Refinery investment has very large prospects," Purbaya said.



Previously, PT Pertamina (Persero) 's Megaprocessing and Petrochemical Processing Director Ignatius Tallulembang said that all Refinery Development Master Plan (RDMP) and Grass Root Refinery (GRR / new refinery) projects were still in the status of National Strategic Projects (PSN).

He added until now the entire refinery project construction process is still in accordance with the target. The breakdown includes, among others, Balongan Refinery which works in three phases, in phase 1 it has now entered the procurement auction process and is targeted to be onstream in 2022.

While for phase 2 studies are being carried out to increase its capacity which will be completed in September or October 2020 which will be followed by engineering studies.

CPC Corporation, Taiwan

For phase 3, Ignatius said, it was just agreed to cooperate with CPC partners from Taiwan related to petrochemical processing which would later integrate with existing refineries. Phase 3 is targeted for completion in 2026. Furthermore, at the Cilacap Refinery in Central Java, Pertamina is looking for new partners after Saudi Aramco decided to withdraw from cooperation in developing the refinery.

Double Impact

Ignatius asserted, although it requires a large investment, the refinery development can have multiple impacts on the economy. With a total investment of around US $ 48 billion if the project is completed, the refinery, which currently has a capacity of 1 million barrels per day, will increase to 2 million barrels per day so that fuel oil needs can be fulfilled without the need for imports.
Fahmy Radhi

     Gadjah Mada University's School of Energy Economics Fahmy Radhi believes the refinery business has a sustainable market certainty even though it requires a large investment fund with a long-term return on investment with a small return.

"I predict in early 2021, foreign investors will flock to Indonesia to invest in oil refineries," he said.

Fahmy believes that Pertamina must have a commitment that oil refineries are needed right now, so it needs a meeting to benefit both parties in the negotiation process. In addition, the government must provide a number of fiscal incentives and facilities in the process of land acquisition needed for refinery development.

Bisnis Indonesia, Page-14, Wednesday, June 10, 2020.
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