Pertamina told to process crude abroad
JAKARTA - Indonesia's Energy and Mineral Resources Ministry has suggested that state-owned oil and gas firm PT Pertamina process its crude oil purchased from countries in the Middle East in overseas refineries pending upgrades to domestic refineries.
IGN Wiratmaja Puja, the ministry’s oil and gas director general, said on Tuesday that the work was still underway, and new refinery development had yet to be completed.
“The crude price has dropped more significantly compared to the declining price of petroleum products. Therefore, processing crude oil overseas and bringing the products to Indonesia will be cheaper than directly purchasing and importing fuel products into the country,” Wiratmaja said.
Indonesia has seen soaring demand for fuel of late. Meanwhile, domestic crude oil production is declining and aging refineries can no longer run at full capacity. The import of crude oil and petroleum products has undermined the country’s trade balance.
Wiratmaja said the government expected that the processing of crude at overseas refineries would be temporary.
“When the capacity of our refineries expands, we will process it domestically so that we will have value-added activities,” he said.
Earlier, Pertamina said that it had considered selecting overseas refineries to process its crude oil that could not be processed in the country’s facilities. Crude oil from Iraq is among the commodities that do not match with the specifications required by Indonesian refineries.
Pertamina is interested in West Qurna 1 block in Iraq. The block reportedly contained the potential for 33,500 barrels of oil per day (bopd) in production last year. The company estimates higher production from the block this year and will deliver the product to cater to domestic demand.
Pertamina president director Dwi Soetjipto said his company expected to seal a deal with a refining company from India to process about 1 million barrels of crude oil from Iraq every month.
“There is crude oil from overseas that cannot be processed in our refineries. Therefore, we want to refine the crude in other refineries abroad,” Dwi said.
Currently, Pertamina operates six big refineries that together have more than 1 million barrels per day in capacity. However, the facilities are no longer efficient due to age and outdated technology and they can only produce approximately 800,000 barrels per day.
Total demand in the country is estimated to be equal to 1.6 million barrels per day. However, Indonesia’s fields, which are mostly depleted due to past exploitation, can provide less than 800,000 barrels per day.
In the past, the country planned to build new refineries. However, the plans fell through primarily because of financial issues.
Currently, Pertamina is working to select a partner to develop a refinery in Tuban, East Java. The company is also working to upgrade its Cilacap refinery in Central Java.
Apart from Pertamina’s Tuban project, the government is planning to open investment opportunities for foreign firms to establish new refineries in Bontang in East Kalimantan and Arun in Aceh.
