Refineries in Indonesia

Refineries are considered to be key components of petroleum products supply – 10% of the average price are attributed to refining costs.  According to ENI Research there are 658 refineries in the world at this time. Recently the analysts note China building new refineries at big rate. Saudi Arabia is not lagging with its huge refinery at Jubail. However, the latest trends signal that the rate of refinery expansion in the West is going down, while in Asia is on the rise.

“Asia Pacific is the region with the highest activity in terms of numbers of refineries opened and closed, even as small, polluting, and less efficient refineries are being closed and world-scale state-of-the-art facilities are coming on line. In this highly attractive market, international oil majors are becoming much more involved in joint ventures to build petrochemical plants, attracted by relatively high economic growth in many countries.” (Refining 2021: Who Will Be in the Game? A.T. Kearney study of the global refining market. In North America and Western Europe).

Rapidly changing macroeconomic climate, refinery infrastructure  investment meet a lot of challenges (you may read more in Refinery Projects Outlook 2012: ‘Cracking’ times for Eastern markets in Infrastructure Journal).

This graph represents current situation

Source: Asia, Middle East lead modest recovery in global refining

Refinery comprises upstream components, process units, downstream components, and product storage. Description of typical composition of oil refinery can be found in this document: CHARACTERISTICS AND COMMON VULNERABILITIES INFRASTRUCTURE CATEGORY: PETROLEUM REFINERIES

It is well known that Indoensia desperately needs more refineries. Pertamina operates six refineries across the country that have combined daily capacity to process 1 million barrels of crude oil. Yet domestic consumption exceeds that amount, at the equivalent of 1.4 million barrels per day, and Indonesia must import fuel products. All of the existing refineries are old, making production activities inefficient. The last refinery built in Indonesia was in 1994: Pertamina’s Balongan facility in West Java. 

A Barrel Full provides this data for operational refineries:

Indonesia

•  Balongan Refinery (Pertamina), 125,000 bbl/d
•  Dumai Refinery (Pertamina), 120,000 bbl/d
•  Cilacap Refinery (Pertamina), 348,000 bbl/d
• Balikpapan Refinery (Pertamina), 260,000 bbl/d
• Plaju Refinery (Pertamina), 135,200 bbl/d
•  Kasim Refinery (Pertamina), 10,000 bbl/d
• Sungai Pakning Refinery (Pertamina), 50,000 bbl/d
• Pangkalan Brandan Refinery (Pertamina), 5,000 bbl/d
• Cepu Refinery (Pertamina), 3,800 bbl/d (600 m³/d)

This slide shows the positioning of Indonesian refineries:

 Source: Peratmina's presentation Oil Refinery Process 

I recommend to download this presentation – as it has a lot useful information, like schematic diagrams for each of the refineries.

There are big plans for construction of new refineries, that are based on fuel needs:

Fuel needs and New Refinery Development Plan

 

Source: Peluang Investasi: Sector BDSM

The plans call for development of new oil refineries and restructuring of existing ones. Restructuring program was launched by Pertamina in 2008 to pursue need for additional capacity of fuel supply  -- however,  technology and development costs are relatively expensive. Just an example, restructuring refinery in Balikpapan requires U.S. $ 1.5 billion.  The following tables provide data for construction of new and restructuring of existing facilities:

Source: Peluang Investasi: Sector BDSM
A Barrel Full provides this data for planned greenfield and upgrade projects:

Indonesia

·        Bangka Belitung Refinery Project, PT. Biliton Refinerindo
·        Central Java Pertamina Upgrade
·        Cilacap Refinery Upgrade Project, Upgrade
·        Pare Pare Refinery Project Intanjaya, New Plant
·        Sumatra Dumai Refinery Project, PT Pertima/SK Corp expansion
·        Tuban East Java Refinery Project new plant
·        West Java Refinery Project
LATEST DEVELOPMENTS

At present, Pertamina is working on the construction of the refinery with Kuwait Petroleum Company and Saudi Aramco Asia Company Ltd.

Pertamina has chosen Kuwait Petroleum Company as its partner to build a refinery with a fuel production capacity of 300,000 bpd, Balongan, West Java, near Pertamina's existing refinery. In 2011 the MoU was signed – on conditions that crude oil would be provided by Kuwait Petroleum.

Pertamina has selected Saudi Aramco Asia Company Ltd.  to construct another refinery with the same production capacity to be located either in Tuban, East Java or in Bontang, East Kalimantan. Both refineries, require combined investment of US$20 billion, are expected to begin operations in 2018. However, both Kuwait Petroleum and Saudi Aramco demandedthe following incentives:

• a tax holiday for up to 30 yearsprice premium 15% above the benchmark provided by Mean of Platts Singapore (MOPS) for the crude oil supplied to the refineries
• exemption of import duty
• no other companies appointed to supply crude to the refineries.

These demands are strongly opposed by Indonesian Government -  Pertamina’s programs now  appear to be at a standstill. Now, intensive discussions and some practical steps are on the way to make a single refinery project -- entirely funded by the state budget. The project is set to begin in 2015, and the government has allocated Rp 17 billion ($1.7 million) for a feasibility study and Rp 250 billion for preliminary design. Construction will cost Rp 90 trillion and will be completed in 2018.

•  Quite recently, it was announced that Azerbaijan’s state oil company, SOCAR, is planning to build a US$4.8-billion., 600,000-bpd oil refinery in Batam in partnership with OSO Group. Funding and crude oil would be provided by Azerbaijan, with the project set for completion in 2017.
• China's Sinopec, has begun work on an $850-million oil storage terminal - Southeast Asia's largest - on 360 hectares of land in Batam's Free Trade Zone. A refinery and petrochemical project are in the second phase of the development.
• Indonesia's Setdco Group and its partner PT Intan Megah have sought permission to build a 300,000-bpd refinery at Tanjung Sauh on Batam, with oil delivered from the Middle East.
• Gulf Petroleum Ltd., Qatar's largest oil company, announced plans to build a refinery on Batam. Gulf Petroleum was preparing documents needed to seek an investment license from the Indonesian government, but the project still has not materialized.
• Last April it was announced that Pertamina, and Thailand`s PTT Global Chemical Public Company Limited will build a petrochemical refinery with up to $ 5 billion investment of up to five billion dollars. Heads Of Agreement  had been signed  to carry out feasibility study, and to form a Joint venture in 2013. Commercial operation of the refinery is targeted to be done at least by 2018. The refinery will be built in one of the Pertamina currently operating refinery, but the location is still under evaluation.

 There is one interesting observation. All these announcements look like strategic plans, but in reality, this is indeed a big deal.  Media reminds that for a similar-sized refinery proposed for South Dakota in the U.S. the requirement would be 4,500 construction workers for 4-5 years, and 1,800 high paying permanent jobs would be created. Is there enough personnel in Indonesia for such projects???

CASE STUDY

And finally, I would like to show an interesting project that is going on from the beginning of 90-ies. This refers to construction of first Indonesian private oil refinery in Pare-Pare, South Sulawesi. It is being developed by Inter Global Technologies of Texas, USA, and Hi-Tech International Group, Riyadh, Saudi Arabia and PT Intanjaya Agromegah Eternal. Apparently, the project is not developing, but this material from the East West International, Korean company, is a very good case summary for refinery project.

 

As usual, some inertesting links:

• Refining ABC by Statoil
• The Roles and Functions of Refineries in a Total Energy Industry  by Yoshitaka Hayauchi, Research and Planning Department,  Petroleum Energy Center (PEC)