Pertamina eyes $1 bln refinery expansion with SK

By Muklis Ali, Reuters - 2006-12-05 10:55

JAKARTA, Dec 4, 2006 (Reuters) - Indonesia's state oil and gas company, PT Pertamina, plans to cooperate with South Korea's SK Corp. (003600.KS: Quote, Profile , Research) in a $1 billion expansion of its Dumai refinery, the president of Pertamina said on Monday.

The capacity of the refinery in Sumatra island will be raised to 170,000 barrels per day (bpd) from 120,000 currently.

"We will start a study on it next year and it could take two to three years to build," Pertamina's president director, Ari Soemarno, told reporters.

"We will also study which crude oil we will use to be processed whether sweet crude or sour crude," he added. Last week, Pertamina signed an agreement with Japan's Mitsui & Co (8031.T: Quote, NEWS , Research) to build a new gasoline cracking unit also costing about $1 billion at its Cilacap refinery.

Indonesia's ageing refineries badly need an overhaul, but foreign investment plans have not been followed through, hindered by sketchy regulations and an uncertain legal climate.

In April, SK Corp., South Korea's top oil refiner, signed a joint venture with Pertamina to build and operate a lubricants plant in Indonesia.

The plant due to be built at the Dumai refinery by the first half of 2008, will produce 7,250 bpd of group III base oil.

On the deal with Mitsui announced last week, Pertamina's processing director Suroso Atmomartoyo has said the new unit in Cilacap would have a capacity of between 40,000 bpd and 50,000 bpd and the company planned to start building it by 2008 at the latest and expected it to begin operations in 2010.