May 5, 2012:

Investors engaged in the construction of oil refineries will receive financial incentives from the government after they complete their feasibility studies, Finance Minister Agus Martowardojo said  “After completing feasibility studies, we will review the results and see what kinds of incentives are needed by the investors so they can earn returns at the amounts that they expect. We cannot give the incentives before the feasibility studies,” he told reporters in Jakarta on Thursday.
Indonesia is in dire need to build more refineries to curb fuel imports. The country currently has six refineries that can process up to 1.03 million barrels of oil per day (bpd), but they currently only produce 676,000 barrels.  The refineries are located in Dumai, Riau, which has 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 Energy and Mineral Resources Ministry has predicted that in 2015, demand will reach 1.29 million bpd with an assumption that fuel consumption would grow 4 percent per year. The last refinery built in the country was Balongan in 1994.
An expansion project is currently underway in the Cilacap refinery. A residual fluid catalytic cracking (RFCC) plant will be built, which will increase capacity to 411,000 bpd. The project is expected to be completed in 2014. To anticipate growing demand, the government has announced that it will build three new refineries. The refineries are located in Balongan, Banten and Tuban, East Java.
The government is negotiating with Kuwait Petroleum Corporation (KPC) for the expansion of the Balongan refinery. The company is demanding more incentives, despite the government agreeing to give it a tax holiday, charge lower income-taxes and allow tax-free imports for certain chemicals.
In Tuban, state oil and gas firm PT Pertamina and Saudi Aramco will team up to build a refinery and a petrochemical compound.
For the Banten refinery, Pertamina was supposed to cooperate with Iran’s Oil Refining Industries Development Company (ORIDC), but the company has withdrawn from the project. The Energy and Mineral Resources Ministry’s oil and gas director general, Evita Herawati Legowo, predicted that the Tuban refinery would start operating earlier than the other two planned refineries. “Aramco has not requested any incentives yet. It agrees to conduct a joint study first. After that, they will see whether incentives are needed or not,” she said.
She said that negotiations with Kuwait for the Balongan refinery were tougher since the company came with a wish list of incentives. The government could only agree to several points proposed, she said.
Evita said the construction of the Balongan and Tuban refinery could be started in 2015 at the latest and the two refineries could begin commercial operations in 2018. “Both refineries will have a total capacity of 300,000 bpd,” she said. “We hope all problems about incentives can be solved this year.”

By The Jakarta Post