December 10, 2014
Pertamina Signs $25bn Refinery Upgrade Deal With Aramco, Sinopec and JX Nippon
Jakarta. Indonesia’s state-owned energy company Pertamina on Wednesday signed strategic partnership deals with three global oil refiners — JX Nippon Oil and Energy of Japan, Saudi Aramco, and China Petroleum & Chemical Corporation, better known as Sinopec — for projects involving $25 billion in investments.
The deals were inked through four memoranda of understanding, in terms of which the three global refiners agreed to participate in the state-owned energy firm’s Refining Development Master Plan (RDMP).
The projects involve the upgrading of five of Pertamina’s six refineries. The work is estimated to be completed within a decade.
“The MoU for a strategic partnership in the RDMP is the end of a long search for partners, which has taken about a year. Pertamina has undertaken road shows in search for strategic partners, based on their financial capacity, operational expertise and evaluations on the prospects of doing business together,” Pertamina said in a statement on Wednesday.
“The strategic partners will get access to Indonesia’s fast-growing [fuel] market,” the company said, adding that around 400 companies had been considered during the selection process.
According to global energy information provider Platts’ report on Wednesday, Indonesia, Southeast Asia’s largest consumer of oil, typically imports 9 million to 10 million barrels of gasoline per month.
With an average oil demand growth of about 6 percent, Indonesia has proven itself as a huge and attractive market for energy companies around the world.
The new administration of President Joko Widodo has initiated reforms in the sector, including cutting fuel subsidy spending, restructuring the management board at Pertamina as well as reviewing its refining capacity.
“The chemical products output from the refineries will also increase significantly. This include products like polyethylene, propylene, polypropylene, and paraxylene,” Pertamina said in the statement.
The state energy firm, through its six refineries, has a total production capacity of 1.04 million barrels per day (bpd). But the refineries are never utilized to maximum capacity as regular maintenance and other technical issues keep the output typically at 820,000 bpd.
Under the RDMP, Pertamina aims to raise its crude oil processing capacity to 1.68 million bpd from 1.04 million bpd, the statement said.
Saudi Aramco was appointed to help Pertamina develop the existing refineries in Dumai (Riau), Cilacap (Central Java) and Balongan (West Java). JX Nippon will help to upgrade the Balikpapan refinery in East Kalimantan, while Sinopec will handle the refinery in Plaju, South Sumatra.
After the MoU signing, Pertamina and the partners will establish teams to evaluate the feasibility of projects and establish the finance and marketing aspects.
Pertamina and partners plan completion of the front-end engineering design for the various refinery upgrade projects in 2015 or 2016, and the entire project by 2025.
Pertamina Signs $25bn Refinery Upgrade Deal With Aramco, Sinopec and JX Nippon | Jakarta Globe
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Saudi Aramco Said to Eye $10b Investment in Indonesian Oil Refineries
Jakarta. Saudi Aramco, the world’s biggest oil company, is reportedly planning to build a new refinery in Indonesia and help state-owned Pertamina upgrade three of its existing facilities.
The new refinery, in Tuban, East Java, will reportedly have a production capacity of 300,000 barrels a day, or a third of Indonesia’s total current capacity, according to Energy and Mineral Resources Minister Sudirman Said.
He also claimed that Saudi Aramco would be involved in upgrades to Pertamina’s refineries in Dumai, in Riau province; Balongan in West Java; and Cilacap in Central Java.
“The initial investment will be about $10 billion,” Sudirman said.
Representatives from Saudi Aramco could not immediately be reached for confirmation.
Sudirman claimed the company had requested a tax holiday in light of its investment, and that the Finance Ministry was amenable to providing a tax holiday of up to 20 years.
Finance Ministry officials could not immediately be reached for confirmation.
Sudirman also claimed that Saudi Aramco would be a partner rather than a rival to Pertamina.
“We will sit down with them and with Pertamina soon to find out what are the gaps [in the negotiations],” he said.
Pertamina president director Dwi Soetjipto said there were other potential investors besides Saudi Aramco interested in developing refineries in Indonesia.
“We will evaluate. Most important is how to get it done,” he said.
Indonesia’s six refineries, owned by Pertamina, have a combined capacity of just 649,000 barrels per day, against domestic consumption of 1.26 million barrels per day.
Officials say the country needs at least two new refineries to fill in the gap.
Saudi Aramco Said to Eye $10b Investment in Indonesian Oil Refineries | Jakarta Globe
