Govt may seek new investor for Balongan
Rangga D. Fadillah. The Jakarta Post, Jakarta - 08/03/2012
The Energy and Mineral Resources Ministry said Wednesday that it would find another investor to team up with state oil company Pertamina to carry out its expansion plans for the Balongan refinery in West Java, should Kuwait Petroleum Corporation (KPC) withdraw from the project.
“There is a possibility to look for another partner, but we don’t want to end talks with KPC,” said the ministry’s oil and gas director general Evita Herawati Legowo in Jakarta.
The Kuwaiti company might withdraw from the Balongan expansion project because not all of the incentives proposed by the company were granted by the Finance Ministry.
Despite the incentives problem, Evita said she expected that a deal on the expansion project could be secured this year so that the refinery could start commercial operation in 2017, according to schedule.
With KPC’s investment, a new refinery will be set up in the current refinery compound which will ramp up Balongan’s capacity from the current 200,000 barrels per day (bpd) to 325,000 bpd.
“There are some companies that have come to us to express their interest in getting involved in the project if KPC cancels,” she said, but declined to name the companies.
KPC has proposed that the Finance Ministry grant it several additional incentives, including waving import duties. However, the ministry’s fiscal policy agency rejected some of the requests, saying that some of the proposed incentives were unrealistic.
The agency said Pertamina should find a investment partner that was not as demanding as KPC, such as Saudi Aramco Asia Company Limited (SAAC).
Pertamina and Saudi Aramco had agreed to build a refinery with a total capacity of 300,000 bpd and a petrochemical compound.
Pertamina spokesperson Mochamad Harun confirmed that the Finance Ministry had rejected some of the incentives proposed by KPC, however he did not know the details.
“We are still discussing the progress with KPC and we don’t have a plan to find other partners yet,”
he said.
Pertamina and KPC signed a memorandum of understanding (MoU) for the Balongan refinery expansion project on Aug. 19 last year. The MoU said the two companies would team up in conducting a feasibility study and all crude oil processed in the refinery would come from Kuwait.
Evita said that to catch up with the growing demand for oil-based fuels in the future, Indonesia needed to build at least three refineries. In addition to Balongan and Tuban, another refinery was planned to be constructed in Banten.
For the Tuban refinery, 250,000 bpd of crude supply will be taken from SAAC based on a long-term contract, while the remaining 50,000 bpd will come from other suppliers. The project value is estimated to hit US$9 billion.
Pertamina currently operates six refineries with a combined capacity of 1.03 million bpd, but they produce only 677,000 bpd of fuel products. The refineries are located in Dumai, Riau, with a capacity of 170,000 bpd, Plaju in South Sumatra (118,000 bpd), Cilacap in Central Java (348,000 bpd), Balikpapan in East Kalimantan (260,000 bpd), Balongan in West Java (125,000 bpd) and Kasim in West Papua (10,000 bpd).