Pertamina’s six refineries, which have a combined capacity of 1 million barrels of crude oil per day, include this facility in Cilacap, Central Java. (Reuters Photo)
Jakarta. The Energy and Mineral Resources Ministry scrapped a Rp 200 billion ($17 million) budget allocation for a refinery feasibility study in Bontang East Kalimantan, in a governmental belt-tightening effort, a ministry official said on Friday.
The budget cut may further diminish the Bontang project, which was intended to be state-funded.
President Susilo Bambang Yudhoyono issued a decree last month to reduce budget spending on ballooning energy subsidies by as much as Rp 100 trillion. Lawmakers approved a Rp 1.9 trillion budget cut for the Energy and Mineral Resources Ministry, which removed the Rp 200 billion allocation for the project.
Ministry secretary general Teguh Pamudji, said that the study will be performed by a state-owned enterprise and financed by private investors.
Sofyano Zakaria, director of the Center of Public Policy Study, a private think tank, said the refinery project is one of the priority programs that the next administration must address.
“We must not look at the refinery project from the economic aspect or its profitability. It is all about our effort to enhance our energy security,” Sofyano said.
The new refinery is expected to have a capacity to process around 300 barrels of oil per day. The government claimed to have secured around the same amount of crude supplies from Iraq. Initially, the government planned to spend as much as Rp 90 trillion to build a new oil refinery before it decided to invite private investors for the project in a public-private partnership scheme.
Private investors had previously expressed interest in building a refinery project with state energy company Pertamina, but it was withdrawn after the government didn’t grant the necessary incentives.
The government had allocated the funds for the feasibility study from last year’s state budget, but never ended up using the money.
That only serves to underscore the snail-pace progress that the government made in realizing the country’s seventh oil refinery.
Indonesia has six oil refineries with a combined capacity to process around 1.1 million barrels of oil per day. The Balongan refinery in West Java built in 1994 was the last such facility built in Indonesia.
Instead of building a new facility, Pertamina has opted to upgrade its existing refineries in an investment plan that would cost around $7 billion and boost capacity by a third.
By Tito Summa Siahaan on 08:55 pm Jun 20, 2014
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