DEN Supports Pertamina’s Move to Build Refinery for Energy Security

MINISTRY OF ENERGY AND MINERAL RESOURCES

REPUBLIC OF INDONESIA

PRESS RELEASE

NUMBER: 202.Pers/04/SJI/2020

Date: 9 June 2020

DEN Supports Pertamina's Move to Build Refinery for Energy Security

Indonesian National Energy Council (DEN) fully supports PT Pertamina's move to continue the refinery development megaproject as part of the efforts to maintain energy security. This move has been made to reduce and remove dependency on oil fuel imports.

"Our oil fuel needs in the National General Energy Plan (RUEN) until 2050 are 3.7 million barrels per day (bpd). To date, most of our supply comes from domestic refineries. However, some portion is still imported until 2024-2025," said Secretary General of National Energy Council (DEN) Djoko Siswanto at a webinar discussion held by Center for Human Resources Development for Oil and Gas (PPSDM) of Ministry of EMR, Tuesday (9/6).

Djoko explained that refinery development is one of the long-term energy policy strategies prepared by the government. Ministry of EMR has decided to increase the capacity of national oil refinery to over 2 million bpd in 2025 through the Refinery Development Master Plan (RDMP) and Grass Root Refinery (GRR). "If we had more storage during a pandemic like this, we could have stored more domestic oil," said Djoko.

To help the program execution, the government has provided legal umbrellas for Pertamina. In addition to Presidential Regulation Number 146 of 2015 on Construction and Development of Domestic Refineries, Ministry of EMR issued 4 ministerial decisions on assignment to Pertamina to develop refineries in Bontang (East Kalimantan), Cilacap (Central Java), Tuban (East Java), and Balikpapan (East Kalimantan).

"This way, Pertamina can run the project, look for funds. It can work together with other parties, domestic or foreign, or it can use its own funds," said Djoko.

Djoko explained that the energy security indicator is very much determined by the capacity of oil fuels and LPG refineries to meet 100% of domestic needs. All the more, if oil fuels and LPG storage period can be up to 30 consumption-days.

"With accelerated development of refineries, the production of oil fuels and LPG refineries for domestic needs will increase. Thus, the indicator score of oil fuels and LPG supply will pick up. Undoubtedly, this affects a rise in energy security," Djoko asserted.

As the executor of the refinery development megaproject, the decision to continue refinery development in the middle of the Covid-19 pandemic is important for PT. Pertamina. The decision was made because Pertamina would have difficulty with meeting domestic needs if it is faced with the current refinery condition.

"Pertamina's refineries themselves are not new. The latest refinery we built was Balongan. Because most refineries are old, competitiveness is a challenge to Pertamina," said Amir H. Siagian, SVP Project Execution of PT Pertamina's Processing & Petrochemical Megaproject Directorate.

Amir explained that Pertamina refineries were designed to process Sweet crudes, or crude oil with relatively low sulfur content. Meanwhile, most imported and domestic crudes are of Sour type. "This has made the margin drop. For this reason, we'll build heavy oil refineries, for example the one in Tuban," he said.

Additionally, most of the refineries that Pertamina manages use old technologies so that they have low competitiveness. "On average, our refinery complexity is below 9, so naturally the operating cost is still high," said Amir.

Amir hopes that by continuing the megaproject, domestic needs for energy will be met with close attention to product quality, environmental-friendly standards, and positive financial performance of the company, particularly with the full support from the government. "The regulations that the government issued will strongly support us, for example in terms of licenses and permits," Amir concluded. (IY)

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