REPUBLIKA.CO.ID, JAKARTA -- Cooperation between state-owned oil company PT Pertamina and Russian oil company Rosneft Oil Company to build an oil refinery in Tuban, East Java, is a strategic step to strengthen the country's energy security.
Pertamina has signed an agreement with the Russian counterpart to build oil refinery and petrochemical projects in Indonesia as a result of last month's visit to Russia by President Joko Widodo.
"If Pertamina has the opportunity to strengthen its business through trade off, I think it is very good," Director of Indonesia Petroleum Association (IPA), Sammy Hamzah, said here on Wednesday.
Sammy said oil and gas business carries high risk and needs large capital and high technology and long time horizon.
Pertamina potentially has an additional oil production of 35,000 barrels per day and a reserve of 200 million barrels through the cooperation with Rosneft as part of the agreement on the Tuban oil refinery project signed last week, he said.
Minister for State Enterprises Rini Soemarno, who accompanied President Joko Widodo on the Russian visit, stayed longer in that country to discuss details and signed energy cooperaiton with the Russians.
Deputy Chairman of the Indonesian Chamber of Commerce and Industry (Kadin) Ahmad Widjaja said the development of the Tuban oil refinery by teaming up with Rosneft is an important decision of the government as it would mean the country did not have to rely on investors from Middle East.
Coordinating Minister for Economy Darmin Nasution, who also accompanied the Indonesian president during the Russian visit, said "All Russian investors are serious, adding, they need only blessing from the government."
Pertamina has signed agreements with a number of Middle East investors to build oil refineries in the country but failed to implement the agreement.
Under the agreement with Rosneft, Pertamina will have the right over 35,000 barrels per day from a number of oil fields in Russia. Pertamina already chose two blocks to be the source of crude oil to feed the oil refinery.
In the first quarter of 2016, Pertamina recorded production of 305,000 barrels of oil per day , up 14 percent from 267,000 BOPD a year earlier.
Apart from oil fuels (BBM) in the form of gasoline and diesel oil which make up for 75-80 percent of the production, the Tuban refinery will also produce petrochemical feed stock making up 20-25 percent of the total production of the refinery which has a processing capacity of 320,000 barrels of crude oil per day.
Deputy chairman of the Commission VII of the House of Representative Fadel Muhammad described cooperation between Pertamina and Rosneft as positive.
The cooperation needs to be implemented immediately, as it urgently needed by the country, he added.
Currently the country needs 1,578,000 barrels of BBM per day as against the country's production capacity of only 850,000 barrels per day. The shortfall in BBM supply has to be covered with import.
Pertamina is studying plan to establish a joint venture with Rosnet to build the Tuban oil refinery that the project could be operational in 2021 or early 2022.
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