Indonesia Kills Petramina's Crude Oil Refining Monopoly; Welcomes Private Investors to the Sector

Indonesia Kills Petramina's Crude Oil Refining Monopoly; Welcomes Private
Investors to the Sector

The Energy and Mining Ministry of Indonesia has effectively canceled the
state-owned Petramina's monopoly on construction of oil refining plants in
order to bring private investors to the sector and ease the burden of the
state-owned entity. According to the newly signed directive, private
investors now have the option of constructing crude oil refineries in
Indonesia and reach out to the government to receive taxation benefits.

Private entities that will be involved in the construction of the refineries
and crude oil refining will also be allowed to import crude oil from outside
of Indonesia. Such actions will let the country avoid further widening of
the gap between its oil output and consumption.

Indonesia's 2016 budget initially saw the country's crude production at
850,000 barrels per day, which was later revised to 830,000 bpd, while the
budget for 2017 sees Indonesian oil output within the 750,000-790,000 bpd
range. The country is still recovering from the 2014 Sumatra forest fires,
which resulted in crude production falling to 790,000 bpd.

Aside from the already mentioned benefits for private investors, they will
also sell their oil-refined products directly to customers without
Petramina's involvement.

Currently, Petramina owns six refinery plants, all of them in dire need of
modernization. The capacities of the existing facilities are incapable of
fully covering Indonesia's demand for refined oil products. The six plants
together produce around 1 million barrels of refined products per day, which
is less than two thirds of Indonesia's daily consumption. Thus, the country
is required to import the rest.

In October 2016, before the new legislation was signed, Russia's Rosneft
inked an agreement with Petramina, creating a joint venture that would
undertake the construction of a new oil refinery in the East Java province.
The Indonesian side expects construction to begin in 2018 with completion in
2021. Petramina would hold a 55% share in the project.

Overall, Indonesia is trying to ease the pressure on its oil industry by
decentralizing it and inviting private companies into the mix. A similar
tactic is being implemented by Brazil, which, following a corruption scandal
in state-owned Petrobras, released the company from the need to be part of
every oil and gas development project in the country. Petrobras simply
doesn't have the resources to fulfill such obligations.

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Link to Original Article:
http://www.economiccalendar.com/2016/11/21/indonesia-kills-petraminas-crude-
oil-refining-monopoly-welcomes-private-investors-to-the-sector/

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com