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Indonesia says it will let private investors build oil refineries

December 22, 2015

(Reuters) – Indonesia will let private investors build oil refineries in a regulation to be issued “in days”, its chief economics minister said on Monday.

The move will be the latest in a series to seek to restore investment confidence and revive growth in Southeast Asia’s largest economy.

In recent months, the government has announced measures including tax breaks and lower energy prices to try to stimulate growth, this year at its slowest pace since 2009.

“All this time, refinery projects are always given to Pertamina or for Pertamina and its partners,” Darmin Nasution, coordinating minister for economics, told a press conference, referring to the state energy company.

“In the future, we will open it for private investors, although the refined products must be sold to Pertamina to be distributed to the whole of Indonesia.”

Nasution said as part of the measures to take effect in January, Indonesia will bundle a refinery project with a petrochemical plant to make it more commercially viable.

Investors interested to build oil refineries may ask for tax or non-tax incentives and the government will consider the requests, he added.

Pertamina currently operates seven refineries and is working to upgrade four of them, including the one in Cilacap, Central Java, partnering with Saudi Aramco. Saudi Aramco is also looking for further investment opportunities in downstream refining and petrochemical industry.

Cabinet Secretary Pramono Anung said the government aims to speed up the development of refineries in Tuban, East Java, and Bontang in East Kalimantan province.

Pertamina already announced that it was looking for a partner for a greenfield refinery project in Tuban and it will make a selection by January or February.

Getting a refinery in Bontang under way this year was a goal of President Joko Widodo, but it hasn’t happened. The government has previous said it will offer such a refinery, with an expected investment value of 140 trillion rupiah ($10.17 billion), under a public-private partnership scheme.

Also on Monday, the government said it plans to remove import duty for spare-parts for airplanes, beginning in early 2016.

($1 = 13,760 rupiah) (Reporting by Gayatri Suroyo, Hidayat Setiaji and the Jakarta bureau; Editing by Richard Borsuk)

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