Rangga D. Fadillah, The Jakarta Post, Jakarta | Mon, 06/11/2012 11:36 AM
The government will set aside Rp 1 trillion (US$106.8 million) from the 2013 state budget for preparing the construction of a long-awaited new refinery in the country, a senior official revealed over the weekend.
The money would be used to conduct a comprehensive study of the best location for the refinery and how to get a sustainable supply of crude oil, the Energy and Mineral Resources Ministry’s oil and gas director general, Evita Herawati Legowo, said.
“I have requested the House of Representatives to allocate funds to set up a refinery and the request has been granted,” she said.
She said the funding would come from the slot prepared for infrastructure developments, not by cutting the amount of fuel subsidies as previously suggested by the Finance Ministry’s acting fiscal policy chief Bambang Brodjonegoro.
As the construction of the refinery would normally take between five and six years, the new refinery was expected to begin operations in 2019 at the latest, Evita added.
The refinery, estimated to cost Rp 90 trillion to build, would have a total processing capacity of around 300,000 barrels per day (bpd) of crude oil and would produce not only petroleum, but also several petrochemical products, she said.
As to the crude oil supply, she said, the government was still considering all available options, including cooperating with oil companies from the Middle East, which had relatively large production.
Currently, two companies — Kuwait Petroleum and Saudi Aramco — are on the list of potential investors for building refineries. Kuwait Petroleum is interested in setting up a refinery in Balongan, near the existing refinery, in West Java, while Aramco is currently running a feasibility study in Tuban, East Java.
The progress of Kuwait Petroleum’s investment is stalled due to the government’s reluctance to grant incentives demanded by the company, which are claimed by the government to be “excessive”.
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).
The newest refinery is Balongan, which was built in 1994.
Evita said the government-funded refinery would not be located in Balongan or Tuban because the government still expected the two Middle East companies to realize their investment plans.
Komaidi Notonegoro, an energy expert from the ReforMiner Institute, praised the government’s move to fund the construction of the refinery from its own budget. He argued that setting up a refinery was more of a national interest rather than that of a private company.
“There are only two options: using our own money or giving incentives to private investors. Incentives are necessary because the profit margin in the downstream sector isn’t as high as in the upstream sector,” he explained.
“It’s a positive move by the government; we should appreciate that,” he emphasized.
http://www.thejakartapost.com/news/2012/06/11/govt-allocates-rp-1t-preparation-refinery-project.html
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