January 5, 2013:

Indonesia’s oil and gas companies need incentives to encourage them to build much-needed refineries, a top government official says. Deputy Minister for Energy and Mineral Resources Rudi Rubiandini said on Friday that without assistance, oil companies will be reluctant to invest in the refinery business. “The refinery industry is not attractive and therefore incentives are needed so that the internal rate of return can be boosted to a minimum of 12 percent, and thus become profitable for the owners,” Rudi said in Jakarta. The government, through state oil and gas company Pertamina, is planning to build two refineries in cooperation with Kuwait Petroleum Corporation and Saudi Aramco. The refineries will each have a processing capacity of 300,000 barrels of crude per day. Operations are intended to start in 2018. Pertamina and its partners have submitted a proposal to the government seeking incentives. Instead of giving approval, the government has asked Pertamina to review the list. Last year, Pertamina signed memorandums of understanding with the two Gulf companies regarding a feasibility study for the refineries. Pertamina has six refineries with a total capacity to process 1.031 million barrels of crude per day, but more are needed to meet rising domestic demand. The Dumai refinery in Riau has a capacity of 170,000 barrels per day, the Plaju refinery in South Sumatra 118,000 bpd and Cilacap in Central Java 348,000 bpd.

By JakartaGlobe