Indonesia’s refinery buildup to hit Asia’s oil product exporters: Fuel for Thought
Monday October 3, 2016
Backed by top oil producers Saudi Arabia and Russia, Indonesia’s refining sector development has finally picked up pace and this does not bode well for Asia’s oil product exporters.
Indonesia is the region’s largest gasoline and gasoil importer. The country has been notorious for planning a spate of refining projects over the last two decades with no result. Indonesia last built a new refinery in 1994.
But momentum has picked up since late 2015 when President Joko Widodo signed a decree declaring the upgrade and expansion of the refining industry a top national priority. The decree ensures refining projects enjoy benefits such as preferential tax rates and easy access to land.
The decree has given Indonesia’s state-owned energy company Pertamina the ammunition it needs to go all out and get partners for refining projects.
Pertamina and Saudi Aramco in May this year awarded the engineering and project management services contract for the upgrade of the Cilacap refinery, Indonesia’s largest.
The Cilacap upgrade will hike its total nameplate processing capacity to 370,000 b/d from 348,000 b/d by late 2022. The two companies are also in talks to upgrade and expand the 170,000 b/d Dumai refinery and 125,000 b/d Balongan refinery but details are still to be finalized.
Pertamina is, meanwhile, pursuing a revamp and expansion of the 260,000 b/d Balikpapan refinery and plans to boost its capacity by 100,000 b/d by late 2019.
The state-owned company has also joined hands with Russian state oil giant Rosneft to build a 300,000 b/d greenfield refinery in Tuban, East Java. This refinery is expected to be ready by end-2021.
For Saudi Arabia and Russia, the refinery deals with Indonesia give a boost to their market share at a time of intense competition. Aramco is expected to supply 260,000-270,000 b/d of crude to the refurbished Cilacap refinery and Rosneft will supply 45% of the crude to the Tuban refinery.
In addition to Tuban, Indonesia is planning another 300,000 b/d greenfield refinery in Bontang, and is seeking partners for this project.
Based on current data on refining projects, Indonesia’s refining capacity will go up from 1.02 million b/d to 1.75 million b/d in the next 10 years, excluding possible expansions at Dumai and Balongan.
According to the Pertamina CEO Dwi Soetjipto, the company is targeting capacity of 2.3 million b/d by 2025, incl...