Banten refinery project left in lurch after Iran reneges on oil supplies

Ika Krismantari, The Jakarta Post, Jakarta

State-owned oil and gas firm Pertamina is seeking crude oil supplies from other oil producing countries to feed its refinery project in Banten.

Pertamina director of refining Suroso Atmomartoyo said here Monday evening that the decision was taken following Iran's move to cut its supply commitment to the refinery from 300,000 barrels of crude oil per day to only 100,000 barrels.

"The commitment with Iran is a fragile one, so we are looking for other sources to supply the crude. We have to ensure we get the supplies before the refinery is completed," Suroso said.

Pertamina and the Iranian government have been negotiating to build a US$550-million refinery in Bojonegara, Banten, with a total capacity of 300,000 barrels of refined products per day.

Suroso said that at the beginning Iran had agreed to supply all the crude needs of the plant. However, it later reneged on this, saying it would only be able to supply 100,000 barrels of crude oil per day.

He added that Pertamina was currently in talks with a number of countries to secure the crude supply. He refused to name the countries, saying the negotiations were still at the early stages.

The plan to build the refinery was announced early this year, with the company responsible for the project at that time being Elnusa, one of Pertamina's subsidiaries.

Pertamina recently decided to take over the project and told Elnusa to focus on its other businesses.

Suroso said that the company was still conducting the feasibility study on the Banten project.

Meanwhile, Pertamina upstream director Sukusen Soemarinda said that the company had won a tender for the exploration of an oil and gas block in Qatar.

He said that Pertamina, with its partner, German firm Wintershall, had been awarded the rights to the onshore block last week.

"We have a participating interest of 25 percent in the consortium, while our partner, Wintershall, which will be the operator of the block, has 75 percent," Sukusen said, adding that the two companies would sign a joint venture agreement to develop the block.

He said that the consortium would spend US$40.7 million on the exploration work over five years, with Pertamina responsible for coughing up $11 million of this.

Under Qatari law, the production split will be 85 percent to 15 percent in favor of the government.

The block is expected to begin commercial production by the end of 2008.