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Indonesia to auction oil refinery project in Bontang

PT Pertamina, Indonesia’s state-owned oil and gas company, plans to auction the development of a 300,000 barrel-per-day (bpd) oil refinery in Bontang, East Kalimantan that can produce Euro IV/V-compliant diesel fuel as well as RON 92 gasoline. The investment in the project is estimated at USD9 billion.

The government says it is willing to provide tax incentives, as well as allow a utility sharing plan with the LNG plant operated by PT Badak LNG in the area.

Pertamina’s six other refineries have a total capacity of more than 1 million bpd, yet due to their age, they are running below capacity, effectively at 820,000 bpd. This is not enough to meet the country’s growing fuel demand, and Indonesia has had to increase petroleum product imports to meet demand. In 1994, the last time that Pertamina upgraded a refinery, the Balongan refinery was upgraded to produce RON 88 gasoline and Euro II-compliant diesel fuel.

Pertamina is currently working on upgrading five of its six refineries to increase total combined capacity to 1.68 million bpd. These upgrades would enable the refineries to process more sour crude and higher quality fuels. These projects are among its top priorities.

“We are expecting that our capacity will improve significantly by 2019. Given the increase, we are hoping to be able to improve our energy security,” Pertamina President Director Dwi Soetjipto said.