Indonesia partners with Russia’s Rosneft on $24bn Java oil refinery

KPI workers at the planned site of the Tuban refinery (KPI)
Indonesian national energy company Pertamina has announced plans to invest up to $50bn in the country’s refinery sector next year, Nikkei Asia reports

Around $24bn will go on a greenfield refinery to be built in East Java province with Russian state energy company Rosneft.

The refinery will occupy 840ha in Tuban Regency. It will have 14 refining units for vehicle fuels and seven for petrochemicals. The aim is to build a refinery that can process heavy and high-sulphur crude oil.

Kilang Pertamina International (KPI), Pertamina’s refining subsidiary, set up a joint venture with Rosneft in 2016 to develop the project, but the pandemic delayed work and the engineering design was not finalised until August this year. That work was done by Spanish contractor Tecnicas Reunidas.

The scheme is expected to break ground in the third quarter of next year, with completion due in 2027. Pertamina will hold a 55% stake in the asset and Rosneft 45%.

300,000 barrels a day

Taufik Aditiyawarman, president of KPI, said the project was now looking for a contractor to take on the work on an engineer, procure and construct basis.

Speaking on the sideline of the State-Owned Enterprise International Conference in Bali, he told reporters: “Once completed, we’re hoping the refinery will increase our crude refining capacity by 300,000 barrels a day.”

The project is being made possible by Indonesian President Joko Widodo’s neutral stance on the war in Ukraine. In June, the president, who is chairing the G20 this year, offered to deliver a message from Ukrainian President Volodymr Zelenskiy to Russian leader Vladimir Putin.

The Nikkei notes that Pertamina has been largely unsuccessful in finding international partners to invest in Indonesia’s ageing refinery sector. In 2020, Saudi Aramco pulled out of a plan to upgrade Pertamina’s Cilacap refinery in Central Java province, after signing a joint venture agreement in 2016.

As well as the Tuban scheme, Pertamina will expand capacity at 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.

Pertamina hopes to raise its total capacity to 1.15 million barrels of crude a day by 2024, from 1.03 million as of last year – still some way short of Indonesia’s refining needs of 1.4 million barrels a day.

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