• Iran’s oil ministry says feasibility study being conducted
  • Refining capacity being expanded at slower rate than demand

Indonesia will study a proposal from Iran to build an oil refinery, along with bids from other countries, as it seeks to boost refining capacity to catch up with rising consumption.

Iran proposed a plant with processing capacity of more than 100,000 barrels a day and pledged to provide the crude, IGN Wiratmaja Puja, director-general of oil and gas at the Energy and Mineral Resources Ministry, said in Jakarta on Tuesday. The project’s value is estimated at $8.4 billion and would be built over four or five years in Java, Iran’s state run news agency Mehr reported, citing Hassan Khosrojerdi, head of the joint Iran-Indonesia refinery’s board of directors.

Indonesia, already the only OPEC member that’s a net oil buyer, may need to import half of its annual fuel needs even after increasing its refining capacity by 500,000 barrels a day in the next seven years, according to BMI Research. Iran is seeking to boost crude exports after international sanctions on its economy were eased in January.

A feasibility study on the refinery’s economic justification is being conducted, a spokesman for Iran’s oil ministry said. The National Iranian Oil Co. has not signed any deals on the project, he said. Indonesia has made no decision on Iran’s proposal because it’s still preliminary, Puja said.

Bontang Refinery

Indonesia has also received proposals from China, Kuwait and Russia, Puja said. The ministry hasn’t come to any decisions on the bids. The government plans to offer the Bontang refinery in East Kalimantan to investors before other projects, he said.

Indonesia’s refining capacity may grow 2 percent by 2025 while consumption surges 31 percent in the same period, according to BMI. The country, which reactivated its membership in the Organization of Petroleum Exporting Countries this year, produced 740,000 barrels a day of crude in July, according to data compiled by Bloomberg.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE