- Cooperation pact includes plan to build oil refinery at Tuban
- Pertamina to get opportunity to invest in Russia energy assets
PT Pertamina, Indonesia’s state energy company, and Russia’s Rosneft OAO signed a cooperation agreement that includes a plan to build a new oil refinery in the Southeast Asian nation, the companies said Thursday.
Pertamina, which hasn’t built a new refinery since 1997, will be the majority shareholder in the facility at Tuban, East Java, it said earlier this month. The two companies may invest $12 billion to $13 billion in the refinery project which includes a petrochemical unit, Dwi Soetjipto, president director of Pertamina, told a press conference after signing the accord.
Completion of the Tuban refinery is targeted by the end of 2021, the companies said in a statement. Capital expenditure will be based on the feasibility study and on engineering designs, they said. As part of the deal, Rosneft has offered to share proprietary data and exclusive rights to assess partnership opportunities in upstream oil and gas assets in Russia, they said.
Aging refineries and declining domestic production have turned Indonesia, a member of the Organization of Petroleum Exporting Countries, into a net oil importer. Expansion of refining capacity, including the construction of new plants, is part of a broader strategy by President Joko Widodo to overhaul the energy industry and reduce costly imports.
“Focusing strictly on the project, Indonesia won’t mind whether their partner is Russia or Saudi Arabia, as long as they can fund the investment needed to move the project forward,” said Peter Lee, a Singapore-based analyst at BMI Research. Cooperating with Rosneft may help Indonesia diversify its sources of crude as the refinery may secure most of the oil from Russia, he said.
Pertamina has an agreement with state-owned Saudi Arabian Oil Co. to expand processing capacity at its Cilacap refinery to 370,000 barrels a day from the current 340,000 barrels. The plant will source 70 percent of its crude from the Middle East producer.
The Indonesian company may take a minimum stake of 55 percent in the new refinery project, according to Soetjipto. The refinery will have the capacity to process 300,000 barrels of crude a day, Rahmat Hardadi, Pertamina’s refining director, told the press conference. The plant may produce as much as 35 percent diesel oil, 45 percent gasoline and 15 percent to 20 percent feedstock for petrochemicals, Hardadi said.
Pertamina is hoping to get additional production of 35,000 barrels of oil a day and a reserve of 200 million barrels from acquiring interests in several oil fields in Russia, Soetjipto said. The company is reviewing two assets there and targets an interest of 10 percent to 15 percent in each asset, he said.