The Pertamina Refinery Complete Project Targeting Solar Export Opportunities

PT Pertamina (Persero) states that there is an opportunity to export diesel fuel to the Asia Pacific market, including Australia and New Zealand, once all refinery projects are completed in 2026-2027. Therefore, it is still important to proceed with the refinery project.

Pertamina Megaprojects Processing and Petrochemical Director Ignatius Tallulembang said, after all, refinery projects had been completed, Indonesia would be able to meet all national fuel needs, aka no more imports. In fact, for diesel fuel, his side projects an excess of production that can be exported.

"Solar will exceed their needs. But if you look at supply-demand in the region, such as Australia and New Zealand, they are in deficit and this is our opportunity to export diesel after the refinery project is completed, "he said at an online press conference last weekend.

He explained, although the Asia Pacific region, in general, would have an excess supply of diesel up to 1.06 Million Barrels Per Day (BPD), not all countries are able to meet their own needs. Based on the data used by the company, there are five countries that are projected to have a shortage of diesel in 2030, namely Vietnam, the Philippines, Papua New Guinea, Australia, and New Zealand.

According to these data, Australia will have a solar deficit of up to 427 thousand BPD, followed by the Philippines 152,000 BPD, Vietnam 104 thousand BPD, New Zealand 40,000 BPD, and Papua New Guinea 23,000 BPD. On the other hand, in 2030 after the refinery upgrading and upgrading project construction has just been completed, Pertamina's diesel production is estimated to be around 600 thousand BPD with domestic needs below 500 thousand BPD.

"So, excess diesel is not a problem, because it can be exported to countries that need it," Tallulembang said.

The refinery project also needs to be continued to improve the competitiveness of refineries because the technology of refineries in Indonesia is out of date. National refineries have lower complexity compared to refineries in other more modern countries. As a result, the yield or conversion rate to refinery value products in Indonesia is only around 75% compared to modern refineries which have reached 95%.

"The economics of our refineries are lower. This is because the technology used by the old technology is unable to compete, "he said.

Though referring to the same data, in the Asia Pacific there are countries that also have a very large excess of solar production. Some of these countries are China with a volume reaching 639 thousand BPD, South Korea 491 thousand BPD, Singapore 220 thousand BPD, and Japan 110 thousand BPD.

After the refinery upgrading project, Pertamina targets the national refinery product yield to increase to 95%. Not only that, but the fuel produced will also have a quality equivalent to EURO V.

Stop importing petrochemicals

Not only targeting foreign markets, Tallulembang said, excess diesel can also be used to produce petrochemical products. Moreover, Indonesia is still very dependent on imports to meet the needs of domestic petrochemical products, namely polyethylene, propylene, and paraxylene and benzene.

This is because the company's refinery project is integrated with petrochemical facilities. Two new 300 thousand BPD refineries built by Pertamina in Tuban, East Java Province, and Bontang, East Kalimantan Province, will be equipped with petrochemical processing. In addition, the company is also building a crude oil processing complex into petrochemical products in Balongan, West Java Province with China Petroleum Corporation (CPC).

China Petroleum Corporation (CPC), Taiwan

"From the material balance of the refinery project, we can meet the needs of [petrokima] in the country and eliminate imports altogether," Tallulembang said.

From the company side, the petrochemical business is still very promising in the future. From the results of Pertamina's study and evaluation, the plan to build a refinery will provide added value or profitability for both the company and the country.

Referring to Pertamina's data, the petrochemical production capacity in 2018 is far from needed. Specifically, polyethylene production was recorded at 806-kilo tons per year (kilo tons per annum / KTPA) from the needs of 1,791 KTPA, then propylene production of 903 KTPA from the demand of 1,745 KTPA, and paraxylene and benzene 560 KTPA from the needs of 1,324 KTPA.

While in 2030, the production of polyethylene increased to 3,868 KTPA, propylene 4,378 KTPA, and paraxylene and benzene 1,918 KTPA. On the other hand, the needs of these three types of petrochemical are projected below production capacity, namely 3,459 KTPA for polyethylene, 3,240 KTPA for propylene, and 1,810 KTPA for paraxylene and benzene.

Investor Daily, Page-10, Tuesday, June 9, 2020.

Pertamina and Taiwan's CPC work on the Petrochemical Industry in Balongan

Pertamina and CPC Taiwan agreed to follow up the cooperation in the development of the Integrated Petrochemical Industrial Complex in Balongan, West Java Province, with an investment of US $ 8 billion.

CPC COrporation,Taiwan

This was marked by the signing of the head of agreement (HOA) by Pertamina Urama Director Nicke Widyawati and the President & CEO of CPC Corporation Taiwan who were symbolically represented by Mr. Ming-Huei Chen, CPC Corporation's Vice President, last week. 

     

Nicke Widyawati

      Previously, discussions on this project had been initiated by Pertamina and CPC Taiwan since the end of 2018. And was followed by the signing of a framework agreement and joint Feasibility Study since mid-2019.

Mr. Ming-Huei Chen

"This collaboration was formed because of a long and deep negotiation process. Therefore, we appreciate the efforts of Pertamina and CPC. Project this is the government's priority. We will fully support. We gave the tax holiday confirmation yesterday, "said BKPM Head Bahlil Lahadalia.

Nicke Widyawati

Pertamina President Director Nicke Widyawati asserted that as a national oil and gas company, Pertamina is committed to realizing a strong petrochemical industry in Indonesia. Therefore, it can meet domestic needs and help reduce imports of petrochemical products.

"This project is an important history to strengthen the petrochemical business portfolio so that within the next 10 years, Pertamina can become a major player in the petrochemical business in the Asia Pacific region, "Nicke said.

It is hoped that CPC's experience and expertise in the petrochemical field can help Pertamina to accelerate the development of an integrated petrochemical business with RDMP and GRR megaprojects.

"Going forward, Pertamina together with the government and Taiwan's CPC will continue to strengthen cooperation to complete the project targeted to operate in 2026," concluded Nicke.

Media Indonesia, Page-10, Monday, June 8, 2020.

Pertamina-Aramco Officially Split

Pertamina is more focused on the construction or development of existing refineries. PT Pertamina (Persero) officially parted ways with Saudi Aramco in developing the Cilacap Refinery Development Master Plan (RDMP) mega-project. This decision was taken after Aramco sent a letter of resignation from the project.

Saudi Aramco

Pertamina Megaprocessing and Petrochemicals Director Ignatius Tallulembang said Saudi Aramco had resigned from the project after an agreement to review the cooperation ended in April 2020.

Nicke Widyawati

Ignatius conveyed, Aramco through his leadership sent a Letter to Pertamina's Managing Director Nicke Widyawati who informed Pertamina to proceed with the project without the oil company from Saudi Arabia. This is because Aramco is still focused on other things.

"They asked Pertamina to continue, meaning Aramco could not join the Cilacap Refinery construction. So, for the Cilacap Refinery no longer plans to work with Aramco," Ignatius said in a virtual conference.

Ignatius explained, Pertamina also continued to develop the Cilacap Refinery development project as well as looking for new partners to develop the project.

"Pertamina is in the process of finding a new partner, the land has been dealt while looking for opportunities that exist," Ignatius said.

Pertamina-Aramco Split alias Ambyar

In addition, after the withdrawal of Saudi Aramco there were plans to accelerate building a bio refinery or green refinery in the Cilacap Refinery. Ignatius said, the possibility for a bio refinery could be built faster and could operate in 2022 for a small scale.

Through the Cilacap Refinery development project, the original refinery capacity of 348 thousand barrels will increase to 370 thousand barrels per day (BPD). In addition, there will also be an increase in gasoline (gasoline) production from 59 thousand BPD to 138 thousand BPD and diesel production from 82 thousand BPD to 137 thousand BPD. Officially parting with Aramco, Ignatius said, Pertamina is now looking for new partners while developing the Cilacap Refinery independently.

"Pertamina is currently in the process of finding a new partner while looking for opportunities that we can build first. Then, prepare a business scheme by learning from the case of the Saudi Aramco partnership or other further cooperation," he said.

Overseas Oil and Gas LLC (OOG)

Pertamina had also previously been left by a partner in building a refinery. The State-Owned Enterprises (BUMN) in the oil and gas sector were left by Overseas Oil and Gas LLC (OOG), an oil and gas company originating from the state of Oman in the construction of the Bontang Refinery. 

    Without OOG, Pertamina has been forced to delay the construction of the Bontang Refinery. Ignatius explained, Pertamina would focus more on the construction or development of existing refineries as well as work on projects that had already prepared physical activities.

The previous Bontang refinery was part of Pertamina's six megaprojects consisting of four existing refinery developments, namely RDMP and two new refineries, Tuban and Bontang Grass Root Refinery (GRR). Ignatius emphasized that, despite being expensive, the construction of Pertamina's refineries had a multiplier effect on employment and national economic development.

RDMP and GRR also provide opportunities to improve the quality of fuel products (BBM) that are more environmentally friendly in accordance with international regulations and standards so that in the future a healthier Indonesian ecosystem will be realized.

Of the six refinery projects that were previously expected to be completed by Pertamina in 2022, only two refinery projects will be completed. First, Balongan Refinery in Indramayu, West Java, the first and second phases. Second, the Bio-Refinery in the Cilacap refinery in Central Java. He explained, the two projects to date have shown enormous progress.

Nicke Widyawati

Pertamina's President Director Nicke Widyawati said the schedule for the Cilacap Refinery development project which is a national strategic program or PSN will be reviewed and reviewed by Pertamina. 

Erick Tohir

   Previously, SOE Minister Erick Tohir warned that Aramco's negotiations with Pertamina regarding the valuation of the Cilacap Refinery should not be detrimental to the state. He said, bargaining is a natural thing, but don't let the Aramco and Pertamina negotiations harm the country.

Republika, Page-4, Saturay, June 6, 2020

Siemens Supplies Equipment and Generators for Balikpapan Refineries

Siemens Gas and Power were chosen to supply various compression equipment and power plants for the Balikpapan refinery located in East Kalimantan which is operated by PT Pertamina (Persero).

Siemens Gas and Power

"Siemens Gas and Power is proud to partner with Pertamina on this project," said Matthew China Executive Vice President of New Equipment Solutions for Siemens Energy Oil & Gas Division.

According to him, the good performance of his compressor fleet across the region and strong domestic service capability were the main factors of this strategic victory.

SGT-800 gas turbine

"These two factors, coupled with the performance, efficiency, and reliability of the SGT-800 gas turbine, allow for cost savings in the expansion of the Balikpapan refinery and also contribute to the success of Pertamina's RDMP, this certainly plays an important role in increasing Indonesia's energy security," he explained.

Siemens equipment will be installed as part of the Refinery Development Master Project (RDMP) program. The RDMP development involves the construction of a residual fluid catalytic cracker (RFCC) unit designed with a capacity of 90,000 barrels per day (BPSD), LPG sulfur removal unit (SRU), propylene recovery unit (PRU), and middle distillate hydrotreater 80,000 BPSD. Siemens Gas and Power will supply 17 reciprocating compressors, along with a single step hot gas expander.

Meanwhile, the specific compressor models to be supplied include eight HHE-VL compressors, two HHE-FB compressors, four HHE-VG compressors, and three HSE compressors. In addition, Siemens Gas and Power will also supply four SGT-800 industrial gas turbines and five SST-600 steam turbines for Balikpapan power plants.

The hot gas expander will recover waste heat from the RFCC reactor to produce around 20 megawatts (MW) of power, which will be used to drive a central air blower from the plant, along with a single stream turbine.

This unique arrangement will reduce overall steam consumption and result in significant operational cost savings for Pertamina. HHE piston compressors will be used in various refinery processing units which can help ensure stable operation of the plant. 

This compressor has a quality steel frame, so it can reduce vibrations transmitted to the connected pipes and provide maximum stability using internal ribbed walls and integral cross-member bearing saddle which is located between each crank throw.

Investor Daily, Page-10, Wednesday, June 3, 2020

The Government Must Tidy Up to Improve the Investment Climate

The government must fix the management of national upstream oil and gas if it wants to increase oil and gas investment after the Covid-19 pandemic. The reason is that although oil prices have begun to rise after OPEC + cuts oil production, oil and gas companies will be more selective in choosing the locations where they invest.

Energy observer from Trisakti University, Pri Agung Rakhmanto said, the current oil price trend has not been able to stimulate national upstream oil and gas investment. This condition is likely to last until next year. To increase national upstream oil and gas investment, the government is judged to need to improve the competitiveness of the upstream oil and gas business.

"How to be able to attract large scale investment, because competition in the global market to attract investment will be very tight," he said.

The improvement needed is that the government solve the problems that have been around. Some of these include completing the revision of the Oil and Gas Law, ease of operation, and improving the quality of the work areas being auctioned and including the quality of the data. Current conditions make solving these problems even more important for national upstream oil and gas investment.

The same was expressed by the Former OPEC Governor for Indonesia Widhyawan Prawiraatmadja. According to him, oil and gas companies will not be aggressive in investing if crude oil prices have not exceeded the limit above US $ 50 per barrel. However, projects that have been committed by the company will continue, such as the development of the East Sepinggan Block which is postponed to next year.

"But for something new, especially exploration, will be delayed for a very long time until the price returns to a very good level in a sustained time," he explained.

In this condition, he advised the government to provide incentives for the upstream oil and gas sector and gas infrastructure. According to him, the incentives in the gas infrastructure sector will provide consumers access to enjoy liquefied natural gas / LNG whose prices are down.

"Instead of LNG we are exported at low prices, it is better to be used domestically so that it helps the industrial sector. LNG is currently cheaper than gas pipelines. The key is the existence of gas infrastructure, specifically for LNG regasification, "Widhyawan said.

While Former Deputy Minister of Energy and Mineral Resources (ESDM) Rudi Rubiandini suggested the government to change the way of managing national upstream oil and gas so that oil and gas investment is attractive again. One of them is by not giving up the management of all completed oil and gas blocks to PT Pertamina (Persero).

Chevron

Granting management rights to Pertamina must be accompanied by an evaluation related to block oil and gas production. According to him, maintaining world-class oil and gas companies such as Chevron and Conoco-Philips is a way to maintain current oil and gas production so as not to decrease significantly. Furthermore, if these companies do not leave, the government can offer a new scheme that encourages exploration activities.

Conoco-Philips

"Then the company can be asked to explore with a scheme that makes them not afraid as before after there will be a discovery of new reserves. So that there is hope for the future, "explained Rudi.

Previously, he said oil and gas companies were reluctant to explore because of concerns that management rights would not be continued.

Fluctuating Potential

Related to the movement of world crude oil prices, Widhyawan revealed, it had started to move up. This is because OPEC + and non-OPEC + countries cut their oil production very drastically. In addition to the agreement between OPEC + countries, this production reduction is also assessed because some fields are not economical to produce, where most of the production costs are higher than prices.

This is supported by the easing of mobility restrictions (lockdown) which increases oil demand. For example, in the United States, sales of gasoline and aviation fuel have risen again after briefly reaching their lowest levels as people move. Oil prices will improve in line with increased demand at the time of reduced production.

"In my opinion, this will continue until the end of the year and beyond unless there is a phase two pandemic that makes some countries forced

restriction, "explained Widhyawan.

Pri Agung also expressed the same thing. According to him, easing lockdown, reducing oil production by OPEC +, and cutting shale oil production are factors driving improving oil prices.

"With the 'new normal' scenario which is rather optimistic, oil prices will be the US $ 30-40 per barrel or more. This is more likely to happen, "he said.

Rudi also predicts that oil prices will still be in the range of US $ 30-40 per barrel because production cuts by OPEC + have not had a maximum impact. This is because oil stocks have not decreased significantly because oil demand is still low due to Covid-19.

"Maybe the end of the year or early next year will be able to reach above the US $ 40 per barrel like a number that makes producers start producing," he said.

This condition, according to Rudi, will still be very difficult for the national upstream oil and gas industry. He explained that for oil and gas companies that have managed oil and gas blocks in Indonesia, oil prices of US $ 30 per barrel can only make the company alive.

Investor Daily, Page-10, Tuesday, June 2, 2020

Pertamina-Aramco Premature Partnership

After there was no certainty for almost 6 years, the collaboration between PT Pertamina (Persero) and Saudi Aramco Oil Co. the Cilacap Refinery development project can no longer be maintained.

Efforts to merge the strengths of the two state-owned oil and gas companies withered before they flourished. The decision to separate was disclosed by Pertamina through VP Corporate Communication Fajriyah Usman who stated the cooperation between Pertamina and Aramco in the project was no longer extended.

Fajriyah Usman

"After the extension of cooperation with Saudi Aramco was not carried out, Pertamina continued the Cilacap Refinery Development Master Plan (RDMP) independently, but in parallel, there would still be another strategic partner search," She said.

Nicke Widyawati

No immediate agreement was reached on the cooperation scheme until the valuation of the Cilacap Refinery was the main cause. Last February, Pertamina President Director Nicke Widyawati asserted that his party would still be waiting for offers from Aramco until the end of the first quarter / 2020 or March 2020.

Premature Partnership

It all started in 2014 ago. Pertamina began selecting partners in the Cilacap RDMP by submitting initial estimates of a number of aspects to the project such as capital expenditure of US $ 3 billion to the US $ 3.5 billion and an internal rate of return (IRR) of 15%. Through the development of the RDMP project, refinery processing capacity will increase from 348,000 barrels per day (BPD) to 370,000 BPD.

In addition, there will also be an increase in gasoline (gasoline) production from 59,000 BPD to 138,000 BPD and diesel dad production of 82,000 BPD to 137,000 BPD. With a current capacity of 348,000 BPD or 33% of the capacity of the oil refinery operated by Pertamina, the Cilacap Refinery is the largest refinery in Indonesia. The first phase of the Cilacap refinery has been operating since 1976 with a capacity of 118,000 BPD, while the Cilacap II refinery has operated since 1983 with a capacity of 230,000 BPD.

The resulting products are in the form of fuel oil (BBM) such as gasoline with octane RON 88 (Premium) and Ron 92 (Pertamax), kerosene, Solar, to avtur. Besides fuel, the Cilacap refinery also produces LPG, asphalt, sulfur, and petrochemical products such as benzene and propylene. The project is targeted to be completed in 2025 in order to pursue national energy security and independence which is marked by the stop of importing BBM in 2026.

The start of the partnership was marked by the election of Aramco as a partner with the signing of the MoU in December 2014 followed by The signing of the head of agreement (HOA) in 2015. In 2016, Aramco and Pertamina agreed on a number of key business principles through a joint venture development agreement (JVDA) with the majority portion being owned by Pertamina at 55% and the rest owned by Aramco.

One year ago, in 2017 both completed basic engineering designs with a refinery capacity of 400,000 BPD and an estimated capital expenditure of US $ 5.8 billion. After that, the collaborative process began to face a number of challenges. In 2018, Aramco requested that the Government of Indonesia obtain fiscal incentive facilities, including tax holidays.

Medio 2018, Pertamina has reached the progress of completing three Aramco requests, namely the granting of a tax holiday for 20 years, land acquisition, and approval of the Cilacap Refinery Business Unit (RU) IV spinoff along with the valuation results of the business unit. Regarding valuation, Pertamina has appointed Price Waterhouse Coopers (PWC) as an independent consultant to calculate the results that have been submitted to Aramco, namely an equity value of the US $ 3.98 billion, equivalent to US $ 5.18 enterprise value.

On November 19, 2018, at a high-level meeting in Jakarta, Aramco said that it would review the results of the RDMP valuation IV Cilacap and immediately deliver the results to Pertamina. Signs of the end of the Pertamina-Aramco partnership began to appear as the project valuation was not immediately agreed upon.

Time continued to roll and the signal to search for new partners was given by SOE Minister Erick Thohir on 29 October 2019, after attending the meeting coordination with the Coordinating Minister for Maritime Affairs and Investment, Luhut Binsar Pandjaitan. On the other hand, Pertamina actually shows its desire to partner with Aramco. Other collaboration alternatives were also proposed to Aramco, namely the only cooperated asset was the project new ones, and existing refineries are not included.

However, the offer did not seem to meet an agreement. The Pertamina-Aramco story at the Cilacap refinery in Central Java still ends prematurely. Meanwhile, Special Staff of the Ministry of SOEs Arya Sinulingga said that Aramco's withdrawal from its partnership with Pertamina in the Cilacap RDMP project was not due to the failure of negotiations on the business scheme to be carried out.

"Because corona and oil prices are falling, so the price to the economy does not enter again," he said.

He revealed that Pertamina was currently exploring potential new partners for the project. Arya said the potential partners are oil and gas companies from abroad.

NEED PARTNER

Gadjah Mada University Energy Economics Observer Fahmy Radhi said, reflecting on the negotiation process that took place too long and does not immediately produce a solution to terminate the cooperation is appropriate. Fahmy rate, Pertamina's financial capacity is able to finance the development of the project with a number of options, both absorbing internal funds, as well as from external sources such as the issuance of debt securities. Meanwhile, in terms of technology, Pertamina is also considered capable of continuing the development of the project independently.

"If the Cilacap RDMP project is completed and operational, then Pertamina will find a partner by releasing a maximum of 49% share ownership," he said.

Meanwhile, Executive Director of the Institute for Essential Services Reform (IESR) Fabby Tumiwa believes that Pertamina will find it difficult to develop the Cilacap refinery without cooperating with strategic partners. According to Fabby, of Pertamina's total capital expenditure this year of around the US $ 7.8 billion, half is allocated for business activities upstream, while the portion for refinery construction is not large.

"The investment capability is not enough to finance large projects such as refineries which, despite multi-years financing, will require very large CAPEX," he said.

Likewise, Executive Director of the RefoMiner Institute Komaidi Notonegoro said, business partners were needed by Pertamina to mitigate existing business risks. This is because Pertamina cannot focus its capital expenditure on refinery construction, but needs to be allocated to other business portfolios.

"Generally cooperation is needed because the business strategy is to minimize risk," he said.

The end of the collaboration between Pertamina and Aramco indeed raises big questions regarding the success of the Cilacap RDMP project. A big challenge awaits Pertamina to complete the project, either independently or with other partners.

Bisnis Indonesia, Page-10, Thursday, May 28, 2020

Oil flood

More than 30 tankers gathered near the coast of California, United States, with a full cargo of crude. The ships carried around 20 million barrels of crude oil for days without knowing where to put the cargo. Millions of barrels of oil do not yet have prospective buyers. The story is on the Bloomberg website, Wednesday (22-April-2020). US WTI (West Texas Intermediate) oil is hit hard.

For the May 2020 purchase contract, the price of WTI crude oil is minus. Based on oil trading, Tuesday (April 21), the price is minus 35.55 US dollars per barrel.

minus 35.55 US dollars per barrel

What does it mean? Buyers are even paid to receive crude oil. Therefore, oil producers must incur additional costs for storage, while the storage tank capacity is maximum. That was explained by Lamon Rutten, CEO of Indonesia Commodity and Derivatives Exchange.

When the storage tank is full, where do you want the oil to go? Oil is not leftover laundry water that can be thrown into a ditch. While production continues, which is also expensive, and there are costs for storing oil, the Mafia, on sale oil.

This situation has never happened in the land of "Uncle Sam". In a number of reports, this condition has the potential to make many oil companies in the US go bankrupt. How about in Indonesia? Indonesia, as a net oil importer, can actually benefit from cheap crude oil prices. 

Nicke Widyawati

    As stated by the President Director of PT Pertamina (Persero) Nicke Widyawati, cheap world crude oil prices have the opportunity to import as much oil as possible.

The statement came out when the Covid-19 pandemic was not widespread in Indonesia. However, everything changed when the Covid-19 pandemic was declared a national disaster by President Joko Widodo, which was followed by large-scale social restrictions (PSBB). The Covid-19 pandemic drastically reduced the movement of people and goods.

Not many planes fly and private cars are parked at home. In the public transport sector, long-distance train trips are canceled, whereas taxis and public buses are only parked at their respective puls. That is, the demand for fuel oil (BBM) drastically reduced.

The option to import is much cheaper than draining oil from domestic oil wells. Some refineries will be stopped operating. Pertamina's report shows that national fuel consumption dropped dramatically by 35 percent.

In DKI Jakarta and Bandung, consumption dropped dramatically to 60 percent. Pertamina's efforts to "provoke" the purchase of fuel through a 50 percent cash return service for application-based motorcycle taxi drivers have not been satisfactory.

Solar and aviation fuel stock in Indonesia also broke records, from an average of enough for 25 days to 100 days. All of the above situations led to the insistence that fuel prices in Indonesia be lowered. However, the government indicated it would not reduce fuel prices.

The consideration is the plan to cut oil production of members of the Organization of Petroleum Exporting Countries (OPEC) and their alliances starting next May, as well as the exchange rate of the rupiah against the US dollar. The government is also aware that reducing fuel prices makes Pertamina's fiscal pressure.

Negative crude oil prices in the US also do not necessarily reduce fuel prices there. Another question is, how significant is the reduction in fuel prices when many people need it in the middle of the Covid-19 pandemic?  

Kompas, Page-9, Friday, April 24, 2020

The World Oil and Gas Corporation Consortium Interested with Pertamina

The World Oil and Gas Corporation Consortium Interested in Collaborating with Pertamina to Build Refineries

Energy companies namely Litasco SA-Luk Oil and Energen Global DMCC as well as national companies in the Satria Group flag, expressed their interest in investing in projects that are being carried out by Pertamina in Indonesia. One of them is an investment to build an oil refinery.

Litasco SA-Luk Oil

"According to the information we got, Pertamina has canceled a cooperation contract with one of the global companies for the development of a new Bontang Grassroot Refinery in East Kalimantan. For this reason, we are willing to explore the possibility of replacing Pertamina's previous partner position, "said Energen Country Representative, Bayu Kristanto.

Bayu said Indonesia is very prone to energy crises. With relatively small reserves, Indonesia must buy crude or refined products in large quantities.

"And with limited refinery capacity, of course, we cannot buy a lot of oil by utilizing the low oil prices as current conditions. That way the construction of new refineries is very urgent, in addition to being able to utilize it when the price of oil is low, it is also for national stock security, "he explained.

He warned that Litasco and Energen were not new players in the energy sector. Step two of the big companies are already well-known energy business people around the world. Litasco even has an office in Singapore, which means that Litasco understands very well the problem of the construction of an Indonesian oil refinery.

"The current oil processing capacity in Indonesian refineries is only 1 million barrels per day with oil production of only around 650 boepd. This figure is not enough to meet the national needs of around 1.4 million barrels per day. For this reason, the Consortium is ready to work with Pertamina to meet these needs, of course, with the target price of refinery products that are more efficient if given the trust of Pertamina and the Indonesian government, "he said,

Investors, of course, understand that the largest markets are in East Java (East Java) and West Java (West Java) or Java Island. However, investors are still trying to understand and study the location of refinery development plans that have been studied by Pertamina and the Government of Indonesia.

"What is certain is that investors will carry out all the trust given by Pertamina and the Government of Indonesia in a professional manner. How can the needs of both parties be met properly, "he said.

BNI, BRI, Mandiri, and BTN

Bayu ensures that the business run by the consortium optimizes funding through a sharing or cooperation system. Either it involves syndication of the national banking network, namely through government-owned banks such as BNI, BRI, Mandiri, and BTN that can participate, as well as private banks such as BCA and other large banks.

Bank Centra Asia (BCA

"Litasco and Energen will also use the strength of their international network to collaborate with the Indonesian government, especially Pertamina," he said.

Bayu guaranteed that if Pertamina and the Government of Indonesia provided space for the consortium to participate in the role of meeting national oil needs, Indonesia would no longer need to import or reduce imports as the president complained.

Bayu hopes that the Refinery Investment Principle Agreement (RIPA) between the consortium and Pertamina can be realized soon. He guaranteed to maximize the use of domestic power. Is that human resources and other resources.

"Satria Group and Pertamina certainly understand and understand how to use potential local workers rather than those from other countries. I believe Satria Group will conduct business as usual on this large project, "Bayu said.

Investor Daily, Page-9, Friday, March 20, 2020

Pertamina Chases Target

Unfortunately, the progress of refinery construction megaprojects is still slow due to various problems, especially the amount of investment needed. Not to mention, the margin of difference between production costs and selling prices is also relatively small. 

     Various efforts have been made by the government, ranging from providing incentives, tax breaks, ease of licensing, to providing locations. However, it was not also able to accelerate the completion of the construction of refineries in this country.

President Joko Widodo in TPPI Tuban East Java

President Joko Widodo also expressed his frustration several times. Until finally in December last year directly checked the Grass Roof Refinery / GRR Tuban construction project, East Java, which was integrated with PT Trans-Pacific Petrochemical Indotama (PT. TPPI). 

    At that time Jokowi even gave PT Pertamina (Persero) an ultimatum by giving 3 months to confirm the position and strategy of the Tuban Refinery development.

Pertamina was asked to accelerate the completion of the refinery project before the end of 2023. Based on Pertamina's data, from a number of projects accelerating the modernization of the existing refineries (Refinery Development Master Plan / RDMP) as well as the construction of new refineries (Grass Roof Refinery / GRR) with a total investment of the US $ 40-US $ 50 billion.

The Balikpapan refinery has progress of more than 13% and this year it is targeted to reach 40%. Furthermore, the development targets for the Balongan and Cilacap Refineries in Central Java are still 10% each. For the Cilacap Refinery, Pertamina in 2012 has actually cooperated with Saudi Aramco. However, as of March 2020, there was still no clarity about the cooperation plan.

Saudi Aramco

"We are still waiting for their offer [Saudi Aramco] as to what for this new scheme," said Pertamina President Director Nicke Widyawati.

Nicke Widyawati

The cooperation scheme has changed, bearing in mind that in nearly 3 years the agreement to form a joint venture between Pertamina and Aramco in the Cilacap Refinery project did not immediately meet an agreement related to asset valuation. 

    However, the cooperation options are certainly similar to the development of the Balikpapan Refinery. Overall Nicke is optimistic that the target of lifting 1 million barrels of oil per day (BPD) can be achieved 4 years faster than the original plan of 2030. Moreover, Pertamina continues to accelerate the construction of refineries, day and night, so that it can be completed faster and targeted.

"This optimism is because in 2026 most of the new refineries we have built are already in production."

Pertamina continues to explore various opportunities to acquire oil and gas blocks abroad and is targeting to drill 411 wells by 2020, an increase of 17% compared to the 2019 target of 351 wells. The company even allocated an investment of US $ 7.8 billion, up 84% compared to 2019 valued at the US $ 4.2 billion.

Fajriyah Usman

Pertamina Corporate Communication Vice President Fajriyah Usman added that by accelerating the construction of the refinery, the refinery capacity is targeted to be 2 million barrels so that it can meet domestic fuel needs from its own refineries.

"The target is for all RDMP and GRR megaprojects to be completed in 2026, and gradually refinery capacity increases starting in 2022," Institute for Essential Services Reform (IESR) Executive Director Fabby Tumiwa believes that the slow agreement with potential Pertamina partner investors is an obstacle to refinery development in addition to funding problems.

"What needs to be done immediately is the acceleration of agreements with partners for other refineries. In addition, EPC contracts for upgrading refineries, for example, Balongan West Java, and Dumai refineries in Riau Sumatra. " 

     However, he is optimistic that the RDMP project will start to look successful in 2022-2024, provided the agreement with Pertamina's partners does not back down. "The SOE and Pertamina ministries are trying on track, especially as the project is monitored by the President."

Various efforts have been made to realize the dream of building a new refinery. If the realization is still slow, maybe because it is indeed "not all happy with the project".

Bisnis Indonesia, Page-23, Monday, March 9, 2020