Indonesia, Iran, and Malaysia to build $6b Oil Refinery in Banten

Tehran, Iran | August 10, 2009 by D-8 Secretariat

If things proceed as expected, the refinery plant will be ready by 2012

Indonesia’s state oil company PT Pertamina has planned to establish a joint venture with state firms from Iran and Malaysia to build a 6 billion dollar oil refinery plant in Banten province, Indonesia. Pertamina last year put forward this plan with National Iranian Oil Refining & Distribution Co. (NIORDC) and Petrofield Refining Company of Malaysia.

According to the agreement, 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.

However, Pertamina said the signing of agreement has been postponed from June 22 to early August 2009. The joint venture to be named Banten Bay Refinery would involve Pertamina, National Iranian Oil Refining and Distribution Company (NIORDC), Petrofield of Malaysia and possibly STX Pan Ocean Co Ltd of South Korea.

Pertamina director for processing affairs Rukmi Hadihartini said the signing of the agreement to establish the joint venture company was delayed to give a chance to STX Pan Ocean Co Ltd to take part in the consortium.

The Banten Bay refinery will build a crude processing refinery plant in Bojanegara, Banten.

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.

“Initially, the agreement was to be signed without waiting for STX but we later agreed to give a two-month deadline to the Korean company to decide whether or not it will join the consortium,” Rukmi said.

She said that if STX decided to join the consortium the percentage of the share ownership of the respective members would be renegotiated.

Previously, the three companies had planned to sign the agreement on June 22, 2009, namely Pertamina of Indonesia, the National Iranian Oil Refining and Distribution Company (NIORDC) of Iran and Petrofield of Malaysia.

About 40 per cent of Banten Bay Refinery shares would be owned by Pertamina, 40 per cent by NIORDC and 20 per cent by Petrofield.

Rukmi said that the postponement of the signing of the agreement would not affect the schedule for the completion of the project.

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