Pertamina and Aramco agree to continue their cooperation in Cilacap Refinery upgrade
PT Pertamina and Saudi Aramco officials agreed to continue their cooperation in upgrading the Cilacap Refinery. The agreement was reached on the sidelines of the G20 meeting in Japan which was attended by the Minister of Energy, Industry and Mineral Resources of Saudi Arabia, who is also the chairman of Saudi Aramco, HE Eng. Khalid A. Al-Falih, ESDM Minister Ignasius Jonan, BUMN Minister Rini Soemarno and Pertamina Managing Director Nicke Widyawati.
Cilacap is Pertamina’s largest oil refinery located on the island of Java, near Jakarta, Indonesia. It was built and is operated by PT Pertamina (Persero), Indonesia’s national oil company. The Cilacap refinery currently has the capacity to process 348,000 barrels of crude oil per day. Cilacap is only one of Pertamina’s six refinery projects — four upgrades of existing refineries and two new ones — completion of which is now targeted for late 2026. That date marks the second delay from the initial deadline of 2021.
Saudi Aramco and Pertamina signed the heads of agreement (HoA) for the upgrade and expansion of the refinery in November 2015. Initially, Saudi Aramco pledged to invest USD6 billion in the revitalization of the Cilacap refinery. The refinery upgrade project broke ground in December 2011. But differences in the enterprise value (EV) of the refinery has lead to the delay in setting up the joint company. In an official document of the Energy and Mineral Resources Ministry dated 14 February, Pertamina stated that the EV of the Cilacap refinery was USD5.66 billion, while Saudi Aramco placed the value at only USD2.8 billion. The difference in valuation prompted Pertamina to hire PricewaterhouseCoopers (PwC) to reassess the refinery.
Pertamina VP of Corporate Communication Fajriyah Usman said the two parties agreed to work with “reputable” financial advisors to finalize the valuation and cooperation scheme of the Cilacap Refinery project.
“We welcome this agreement, hopefully, it will become a win-win solution that can be accepted by both parties and accelerate the start of the development of the Cilacap Refinery,” he said.
Usman explained that the Joint Venture Development Agreement between Pertamina and Saudi Aramco is due to end this month. However, this agreement will be extended to the end of September 2019. Earlier, Pertamina indicated that it will look for a new partner if the agreement with Aramco is not completed by June.
“Thus, the valuation and cooperation scheme between Pertamina and Aramco for the Cilacap Refinery must be completed in the next three months,” he added. To support this undertaking, the Indonesian government will form a joint team from the Ministry of BUMN, the Ministry of Energy and Mineral Resources, the Ministry of Finance, and Pertamina.
Indonesia’s Refinery Development Master Plan (RDMP) and New Grass Root Refinery (NGRR) projects aim to double Pertamina’s fuel production capacity from around one million barrels per day today to two million barrels per day. The six projects are Cilacap RDMP, Balikpapan RDMP, Balongan RDMP, RDMP Dumai, Tuban NGRR and Bontang NGRR. In addition to increasing Pertamina’s refining capacity, the projects include a product quality upgrade to EURO V.
Earlier, Pertamina completed the Cilacap Blue Sky project, which became operational in
March 2019. Currently, the Cilacap Refinery is capable of producing EURO IV-compliant fuels.