Home News Pertamina urged to build refineries in eastern Indonesia

Pertamina urged to build refineries in eastern Indonesia

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State-owned petroleum giant Pertamina is urged to build new refineries and upgrade an existing one in the eastern part of Indonesia to cut distribution costs amid its ambitious plan to boost oil production by more than 200 percent by 2030.

Pertamina is looking to upgrade four of its existing facilities, namely the Cilacap refinery in Central Java, the Balikpapan refinery in East Kalimantan, the Dumai refinery in Riau and the Balongan refinery in West Java.

It will also build several new refineries, including one in Bontang, East Kalimantan, and another in Tuban, East Java.

The development of the refineries is part of Pertamina’s plan to increase domestic oil production to 2.6 million barrels of oil per day (bopd) by 2030 from the current 830,000 bopd. By then, it expects to have reduced imports by 70 percent to only 231,000 bopd.

“However, the new refineries should ideally be built in the country’s eastern part, so that we can reduce distribution costs in that region,” Kurtubi, a member of House of Representatives’ Commission VII overseeing energy affairs, told The Jakarta Post recently.

“The costs will be too high for Pertamina to distribute its fuel that is produced in Bontang, for instance, to regions like East Nusa Tenggara or Papua. Why doesn’t the company just build one in Lombok, which is near those areas, to bring down costs?”

Kurtubi, who is also an energy expert at the University of Indonesia, said as the new refineries would use 100 percent imported crude, they should be located close to consumers as Pertamina’s end users, including those in eastern regions.

In September, Pertamina started operating an Air Tractor aircraft with a capacity of 4,000 liters to transport fuel to Papua to improve cost efficiency.

That is after it was estimated in June that the company was spending more than Rp 34.34 billion (US$2.56 million) a month to deliver fuel to Papua and Rp 5.4 billion to West Papua by overland, maritime and air transportation.

“In fact, Pertamina can reduce distribution costs by upgrading its Kasim refinery in Papua. Pertamina can meet most of the oil demand from the region by increasing the refinery’s production capacity to at least 50,000 bopd from the current 10,000 bopd,” Center of Energy and Resources Indonesia (CERI) executive director Yusri Usman said.

Pertamina launched operations at the Kasim refinery in July 1997, its first refinery in the eastern part of Indonesia and the last to be built in the archipelago.

Since then, Indonesia’s oil production has been gradually dropping, falling 39.4 percent to 830,000 bopd at the moment from 1.37 million bopd in 1997. National demand for oil has moved the opposite way, doubling to 1.6 million bopd from around 800,000 bopd.

Yusri said Indonesia needed to immediately build new refineries to boost oil processing, but those facilities should not be concentrated in certain places, such as in the western and central parts of the country.

Multinational financial consultant PricewaterhouseCoopers (PwC) wrote in its “Oil and Gas in Indonesia” report in May that Indonesia had a diversity of geological basins, which continued to offer sizeable oil and gas potential.

The report states that Indonesia has 60 sedimentary basins, including 36 basin in its western regions, that have already been thoroughly explored.

About 75 percent of exploration and production is located in Indonesia’s western part, where the country has four oil-producing regions, namely Sumatra, the Java Sea, East Kalimantan and Natuna.

Meanwhile, East Kalimantan, West Papua, South Sumatra, Sulawesi and Natuna are considered the main gas-producing regions.

—JP/ Viriya P. Singgih

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