President Joko Widodo attend a business forum during his visit to Saudi Arabia.
JAKARTA (rambuenergy.com) – Middle East giant oil and gas company Saudi Arabian OIl Co or Saudi Aramco has expressed its commitment to invest up to US$10 billion in the development of Indonesian oil refineries. The commitment was expressed during a meeting between the Indonesian President Joko Widodo and a number of Saudi Arabian leaders on late Saturday (Sept. 13) at King Faisal Palace.
During the visit, President Joko Widodo met with Saudi Arabia King Salman bin Abdulaziz Al Saud as well as attending a business forum that was attended by business leaders of both countries.
Cabinet Secretary Pramono Anung, who accompanied the President during the Middle East visit, said the commitment was made after the two held a lengthy discussion. Aramco, said Anung, is also interest to build oil storage facilities. The location of the facilities will be furthered discussed.
“During the meeting, the Saudi Arabian Finance Minister expressed the interest of Aramco, owned by the Saudi Arabian government to build oil refineries and oil storages as well as establishing its own distribution network in Indonesia,” said Pramono Anung.
During the visit, President Joko Widodo offers investment opportunities to the Saudi Aramco to invest in oil refineries projects, worth a total US$10 billion.
“That is the concrete output of the meeting. In addition, we also demand elimination of double tax regime which has also been agreed by both parties,” said Pramono Anung. The follow-up agreements will be prepared by the Finance Ministry and Coordinating Ministry for the Economy.
The government is currently drafting a Presidential Regulation (Perpres) to pave the way for private investors investing in oil refineries. The regulation is expected to be completed in the next two weeks or so.
Indonesia is in need of new oil refineries as the existing ones are not capable to process oil to meet domestic demand. Only half of domestic fuel consumption is processed in domestic oil refineries.
Late last year, state owned oil and gas company PT Pertamina signed memorandum of understanding (MoU) with three partners to upgrade its aging oil refineries. The three partners are Aramco Asia, JX Nippon Oil & Energy Corporation and Sinopec (Asia Tenggara) Pte.Ltd. However, follow-up steps have been seen yet.
The partnership is an effort by Pertamina to realize its Refining Development Master Plan (RDMP) program. The estimated cost of the capacity expansion and upgrading works is projected to reach US$25 billion.
Pertamina targets the upgrading works will increase its oil refineries capacities to 1.68 million barrels per day (bpd) from 820,000 bpd at present.
The expansion and upgrading works will also increase the capacity of petrochemical products such as polyethylene, propylene, polypropylene, and paraxylene. These products are raw materials used to produce plastic products.
Aramco is awarded to upgrade Dumai, Cilacap and Balongan refineries, China Petroleum & Chemical Corporation Sinopec Limited is granted to upgrade Plaju refinery and JX Nippon Oil & Energy Corp is given to upgrade Bontang refinery in Balikpapan, East Kalimantan. (*)