Pertamina asks for zero tax policy on new refinery projects

The Jakarta Post, JAKARTA | Thu, 03/19/2009 12:42 PM

The government is considering a proposal from the state oil and gas company PT Pertamina for a zero-tax policy to help speed up the development of its planned refinery projects.

“We have already given fiscal incentives and there is a new proposal for zero tax policy implementation,” Energy and Mineral Resources Minister Purnomo Yusgiantoro said in Jakarta on Wednesday.

“The zero tax policy however will be decided by the Finance Minister. We have also talked with the Investment Coordinating Board (BKPM), which will form a working group with Pertamina to see whether any other incentive is needed,” he added.

Oil and gas industry analyst Kurtubi recently said that the setting up of new refineries was vital to ensure domestic fuel sustainability.

“It is very important for Pertamina to begin developing new refineries because the nation is currently importing around 35 percent of fuel, which shows a vulnerability in terms of our energy sustainability” he said.

This equals to around 350,000 barrels per day of domestic fuel consumption, which calls for the establishment of two new oil refineries with a capacity of producing 200,000 barrels of oil per day each.

Pertamina has said it would build two new refineries in Bojonegara (Banten) and Tuban (East Java) as well as expand its biggest existing one in Balongan of West Java to meet demand and cut imports.

The refinery in Bojonegara is planned to produce around 300,000 barrels per day while the one in Tuban around 200,000 barrels per day. The Balongan refinery, which is one of seven oil refineries owned by Pertamina, now has a production capacity of 125,000 bpd.

“There are also small refineries such as the one in Muba, which produces around 500 barrels per day. The refinery in Cepu is capable of producing around 20,000 barrels per day and others. We will have around 100,000 kilo liters of new reserves.”

However, the addition to reserves was still not sufficient to supply the domestic demand. “Domestic fuel demand is around 1.1 million barrels per day and it grows annually at up to 5 percent,” Purnomo said.

“That means we need to supply around 200,000 barrels per day within the next four years to cope with the demand.”

To facilitate private investors to invest in developing new refineries, the government issued last year a regulation incorporating income tax incentives for private investors interested in investing in the construction and development of new oil refineries in the country. (hdt)