- Indonesian, Russian state companies pursue energy cooperation amid Ukraine war
According to Nikkei Asia’s article published on October 18, 2022, Indonesian state oil and gas giant Pertamina plans to invest up to $50 billion to build and expand refineries next year, nearly half of which will go to a greenfield project with Russian state energy company Rosneft that is moving forward amid international pressure on Moscow over the invasion of Ukraine.
Johan Nababan, director for business planning and development at Kilang Pertamina International (KPI), Pertamina's refinery subsidiary, said Monday that the "grassroots refinery" (GRR) project with Rosneft in Tuban regency in Indonesia's East Java province is expected to cost $24 billion.
KPI President Taufik Aditiyawarman added that the Tuban project is currently in the stage of engineering, procurement and construction contractor selection.
"Once completed, we're hopingwill increase our crude refining capacity by 300,000 barrels per day," Aditiyawarman told reporters on the sidelines of the State-Owned Enterprise International Conference in Bali, part of a series of Group of 20 meetings Indonesia is hosting this year.
Indonesia's G-20 presidency comes as Russia, which is also a member of the group of major economies, is under intense sanctions pressure from the U.S., Europe and Japan over the Ukraine war. Indonesian President Joko Widodo has pursued a largely neutral stance and has sought to deepen economic ties and cooperation within the group despite the sharp divisions over the war.
Earlier this year. Widodo met separately with Ukrainian President Volodymyr Zelenskyy and Russian President Vladimir Putin, and said he offered to help broker peace. But he also said Indonesia would continue to partner with Russia in investment, trade and tourism, while calling for an immediate end to the fighting. Last week at the U.N., Indonesia voted in favor of a General Assembly resolution calling on countries not to recognize four regions in Ukraine that Russia claims to have annexed.
Pertamina has been struggling to find international partners to jointly invest in projects aimed at upgrading Indonesia's aging refineries. Saudi Aramco pulled out of an upgrade in 2020 at Pertamina's Cilacap refinery in Central Java province, after signing a joint venture agreement with Pertamina in 2016.
Pertamina, through KPI, and the Russian company, set up a joint venture called Pertamina Rosneft Pengolahan dan Petrokimia in 2016 to develop the Tuban project, with Pertamina holding a 55% stake and Rosneft 45%.
KPI had no comment on the continued cooperation with Rosneft when contacted on Tuesday by Nikkei Asia. Indonesian Vice SOE Minister Pahala Mansury, asked about any risk of Western sanctions, told Nikkei he hasn't looked into the possibility, though appeared unconcerned. "The GRR Tuban development is currently still awaiting the FIDhope can be done in early 2023," he said.
The new refinery will sit on 840 hectares of land and consist of 14 refining units for vehicle fuels and seven units for petrochemicals. After being hit by delays due to the coronavirus pandemic and other snags, an initial design for the project was finalized in May and the general engineering design in August. The refinery is scheduled for completion in 2027.
"The GRR Tuban refinerybe able to process heavy and high-sulfur crude oil, which is generally known to be a difficult process," KPI said in a news release in August after a ceremony in Madrid marking the completion of the general engineering design that involved Spanish general contractor Tecnicas Reunidas.
KPI also said the refinery will be integrated with a petrochemical industrial complex to process crude materials into petrochemical products including styrene, polypropylene and polyethylene.
Pertamina is also expanding capacity of some of its seven existing refineries, including the Balikpapan refinery in East Kalimantan province. Its capacity will be raised to 360,000 barrels of crude oil per day from 260,000, with the work expected to be completed in 2024. This follows the recent expansion of the Balongan refinery in West Java province, which raised its capacity by 20% to 150,000 barrels per day.
Pertamina hopes to raise its total refining capacity to 1.15 million barrels of crude per day by 2024, from 1.03 million as of last year, which is still short of Indonesia's refining needs of 1.4 million barrels per day.
Overall, including the Tuban project, the company has previously set a target to increase its refining capacity to 2 million barrels per day.
The $50 billion spending plan for 2023 is nearly five times the amount KPI has allocated for capital expenditure this year, at approximately $11 billion.
Nababan said KPI also will go big on petrochemical development, with a plan to spend about $13 billion on related projects next year as part of the Pertamina group's diversification push. KPI has begun work on what it calls "green refineries," such as for the production of hydrotreated vegetable oil (HVO) at the Cilacap refinery at a cost of around $200 million.
Made from crude palm oil, HVO is also called green diesel. Pertamina completed the first phase of its biorefinery development in Cilacap in December last year and began shipping HVO to Europe in August.
