State-owned energy giant Pertamina has appointed a consortium of Omani and Japanese companies as its partner to develop the new US$10 billion Bontang refinery in East Kalimantan.
The deal will see Pertamina make no capital contribution for the refinery, which is expected to have an input capacity of 300,000 barrels of oil per day (bopd) once it is operational in 2025. Pertamina began looking for partners in January 2017.
Cosmo Oil International
After selecting eight companies as prospective partners out of around 100 applicants, the state company eventually chose a consortium consisting of Omani energy firm Overseas Oil and Gas (OOG) and Singapore-based Cosmo Oil International, a trading arm of Japan’s Cosmo Energy Holdings.
Overseas Oil and Gas (OOG)
“We picked this consortium based on several considerations. First, OOG will be backed by the Omani government, whether in terms of financing or crude supply. Then, Cosmo Oil will provide technical support and marketing assistance for this project,” Pertamina petrochemical and processing megaproject director Ardhy N. Mokobombang said.
Ardhy added that the refinery would rely mostly on crude supply from Oman, especially considering the country’s relatively high oil production of around 1 million to 1.2 million bopd compared to Indonesia’s 801,400 bopd as of last year. However, he said Pertamina would still have the right to supply up to 20 percent of the Bontang facility’s crude needs.
“So, if needed, we can utilize Pertamina’s crude stock coming from [our oil fields in] East Kalimantan.”
Pertamina plans to sign a framework agreement with the consortium soon, before immediately conducting feasibility and engineering studies for the project. Then, it expects to reach the final investment decision (FID) and begin the relinery’s construction process by mid 2020.
Ardhy added that the refinery would rely mostly on crude supply from Oman, especially considering the country’s relatively high oil production of around 1 million to 1.2 million bopd compared to Indonesia’s 801,400 bopd as of last year. However, he said Pertamina would still have the right to supply up to 20 percent of the Bontang facility’s crude needs.
“So, if needed, we can utilize Pertamina’s crude stock coming from [our oil fields in] East Kalimantan.”
Pertamina plans to sign a framework agreement with the consortium soon, before immediately conducting feasibility and engineering studies for the project. Then, it expects to reach the final investment decision (FID) and begin the relinery’s construction process by mid 2020.
Pertamina investment planning and risk management director Gigih Prakoso said the consortium would control a 90 percent stake in the project as it would fully fungi Bontang refinery’s development, while Pertamina would own 10 percent without having to inject any capital into the project.
“During the initial preparation phase, Pertamina will only hold a 10 percent stake. But later after the FID has been reached, we will review our status once again, to see whether we have to increase our shares or not in this project,” Gigih said, while adding that this move was needed to reduce Pertamina’s risk exposure.
Pertamina and the consortium will also conduct joint marketing efforts for Bontang refinery’s products through the establishment of a joint venture (JV ) company. The JV will then enter a Sales and Purchase Agreement (SPA) with Pertamina for marketing the refineiys products domestically, while also looking for and securing export markets if there is excess output from the facility. Ardhy said the JV would prioritize the domestic market, as the type of fuel produced from the Bontang facility would also be designed inline with domestic needs.
“Pertamina is currently upgrading its four refineries and developing two new ones. After the completion of all of those projects, we estimate that our gasoline production will just be on par with domestic consumption levels, while there will be a slight excess in terms of diesel supply,” he added.
Hence, Pertamina will optimize the production of gasoline and jet fuel from the Bontang facility, while minimizing its diesel output. Pertamina estimated that it would need around $120 billion to support its business plans within the next decade, one-third of which would be used to finance its various refinery projects.
This year alone, Pertamina has allocated $5.59 billion in capital expenditure, up 55 percent annually. About 59 percent of the allocated figure will be used to support its upstream business activities, including the development of the newly acquired Mahakam block in East Kalimantan and the Jambaran-Tiung Biru field in East Java.
the Jakarta Post, Page-13, Thursday, Feb 1, 2018
“During the initial preparation phase, Pertamina will only hold a 10 percent stake. But later after the FID has been reached, we will review our status once again, to see whether we have to increase our shares or not in this project,” Gigih said, while adding that this move was needed to reduce Pertamina’s risk exposure.
Pertamina and the consortium will also conduct joint marketing efforts for Bontang refinery’s products through the establishment of a joint venture (JV ) company. The JV will then enter a Sales and Purchase Agreement (SPA) with Pertamina for marketing the refineiys products domestically, while also looking for and securing export markets if there is excess output from the facility. Ardhy said the JV would prioritize the domestic market, as the type of fuel produced from the Bontang facility would also be designed inline with domestic needs.
“Pertamina is currently upgrading its four refineries and developing two new ones. After the completion of all of those projects, we estimate that our gasoline production will just be on par with domestic consumption levels, while there will be a slight excess in terms of diesel supply,” he added.
Hence, Pertamina will optimize the production of gasoline and jet fuel from the Bontang facility, while minimizing its diesel output. Pertamina estimated that it would need around $120 billion to support its business plans within the next decade, one-third of which would be used to finance its various refinery projects.
This year alone, Pertamina has allocated $5.59 billion in capital expenditure, up 55 percent annually. About 59 percent of the allocated figure will be used to support its upstream business activities, including the development of the newly acquired Mahakam block in East Kalimantan and the Jambaran-Tiung Biru field in East Java.
the Jakarta Post, Page-13, Thursday, Feb 1, 2018
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