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Pertamina commits to upgrading Cilacap oil refinery while searching for new partner

Pertamina commits to upgrading Cilacap oil refinery while searching for new partner
Photo courtesy of Pertamina

PT Pertamina (Persero) announced that it will proceed with upgrading the Cilacap Refinery in central Java, Indonesia, but without its original joint venture partner Saudi Aramco. The refinery’s capacity of 348 thousand barrels per day (bpd) will be raised to 370 thousand bpd. In addition, gasoline production will be increased from 59 thousand bpd to 138 thousand bpd and diesel fuel production from 82 thousand bpd to 137 thousand bpd.

In December 2016, Saudi Aramco, the worldโ€™s leading integrated energy and petrochemicals enterprise, and PT Pertamina, Indonesiaโ€™s state oil and gas company, signed a joint venture development agreement to jointly own, upgrade and operate the Cilacap Refinery. Saudi Aramco and Pertamina had agreed on the ownership structure of the upgraded Cilacap refinery, where Pertamina will hold a 55% stake and Saudi Aramco will own 45%. Project startup was targeted for 2021.

“Pertamina will continue to independently develop the Cilacap RDMP, while in parallel there will be another strategic partner search,” said Fajriyah Usman, Pertamina’s vice president of Corporate Communication.

Usman confirmed that the joint venture with Saudi Aramco has now been cancelled. Last December, Reuters reported that Pertamina and Saudi Aramco planned to finalize their agreement in the first quarter of 2020, but the joint venture scope would be limited to the planned additional facility in Cilacap. Pertamina would continue to operate the existing refinery and pay processing fees to the JV under the new plan being discussed at the time. But Saudi Aramco has been under a lot of pressure lately with the collapse of global crude oil prices, following its initial public offering, due to demand destruction from the global Covid-19 pandemic.

Usman added that despite reduction in fuel demand and pressure on the rupiah exchange rate, Pertamina remains committed to completing its national strategic projects mandated by the government, including the construction of the Cilacap refinery as part of Pertamina’s Refinery Development Master Plan/Grass Root Refinery (RDMP/GRR) project.

“Pertamina continues to carry out the investment plans that have been contained in the RKAP, while ensuring the mandate of the government to realize national energy independence and security through the construction of refineries.”

According to Usman, Pertamina will maximize and optimize the completion of refinery development projects and the construction of new refineries so that they can be completed according to the set time targets.

“With the completion of RDMP/GRR, Pertamina hopes to meet the government’s target to stop the import of fuel by 2026,” Usman added.