Pertamina, Iran firm to build $6b refinery

Riyadi Suparno , The Jakarta Post , Tehran | Wed, 03/12/2008 1:34 AM

State oil company PT Pertamina signed here Tuesday a joint venture shareholder agreement with National Iranian Oil Refining & Distribution Co. (NIORDC) and Petrofield Refining Company of Malaysia to build a US$6 billion oil refinery plant in Banten.

Pertamina president Ari Soemarno explained that within two weeks of the signing, the three parties would establish a joint venture company in Indonesia which would start immediately on the project to be located in the neighboring province near Bojonegara.

If things proceed as expected, the refinery plant will be ready by 2012, with most of the four-year period to be consumed with construction of the physical plant itself.

"We don't know yet the possible impact of the new sanctions (adopted by the United Nations Security Council) against Iran on our project. But we hope this project will proceed as is," Ari said.

He said Pertamina and Oil Refinery Industries would each have a 40 percent stake in the new company, with Petrofield holding the other 20 percent.

Pertamina, he said, would use a combination of internal financing and loans to come up with its capital contribution to the project. The loans were expected to make up some 65 percent of the total.

During phase one, the refinery would run at 150,000 barrels of crude oil per day. Pertamina and its partners are planing to eventually expand refinery capacity to 300,000 barrels per day.

"Iran is committed to supplying half of the crude oil needs of the refinery, in other words, 150,000 barrels per day," NIORDC president Mohammad Reza Nematzadeh said.

The 300,000 barrels crude oil figure translates into 200,000 barrels of fuel, or about one sixth of the country's total needs.

Currently, because of limitations in domestic refinery capacity, Indonesia imports fuel - -mostly from Singapore -- to the tune of about 400,000 barrels of crude oil equivalent daily.

Thus, once the Banten refinery plant is up and running, it is hoped the coutry will be further able to realize substantial reductions in its dependence on imported fuels.

In addition to the oil refinery plant, Pertamina is also looking into the possibility of investesting into the upstream oil industry in Iran.

Pertamina, Ari said, has participated in a tender for the Laleh offshore oil and gas block, in which it ranked second in the list after an Iranian oil company.

"The Iranian company has agreed to take us as a partner in developing this Laleh oil field. So, we are looking into this possibility of entering into Iran's upstream industry," he said.

Laleh is one of 17 oil and gas blocks the Iranian government has recently put on offer.

Iran is the second largest oil producer at the Organization of Petroleum Exporting Countries (OPEC).