Indonesian and Iranian firms to halve capacity of planned refinery in Java

Jakarta: PT Pertamina, Indonesia's state oil company, and National Iranian Oil Refinery & Distribution Co will halve the capacity of a planned refinery in western Java because of limited crude supply.

The refinery in Banten province will be able to process 150,000 barrels of crude a day compared with an earlier plan of 300,000 barrels a day, Priyo Utomo, head of strategic and business development at Pertamina, said in an interview today.

The new refinery was expected to help Indonesia, Southeast Asia's biggest importer of gasoline and diesel, cut dependence on imports as crude rose to a record. Pertamina and National Iranian signed a joint venture agreement last month to take a 40 per cent stake each in the project, with Petrofield Refining Co of Malaysia having the remaining 20 per cent, Utomo said.

"We want to cut the investment needed and we could only secure supply of 150,000 barrels per day from Iran," Utomo said. "It's still economically feasible.''

The venture plans to start building the refinery next year and complete it by 2011. The plant may cost as much as 60 per cent of the $7.1 billion required for a 300,000 barrels-a-day refinery, Utomo said. The partners have hired United Overseas Bank Ltd. to recalculate the costs for the project, he said.

PT Perusahaan Gas Negara, Indonesia's largest natural gas distributor, has agreed to sell 115 million cubic feet a day of the fuel to the refinery, Utomo said. The gas will be turned into hydrogen and used to improve the quality of the products.