The picture shows part of Cilacap refinery, Indonesia largest refinery operated by Pertamina. (Antara Photo/Idhad Zakaria)

Gov't Ends Pertamina's Monopoly on Oil Refineries, Brings In Private Investors


NOVEMBER 19, 2016

Jakarta. The government will now allow private companies to build oil refineries in Indonesia, bringing to an end a long-standing monopoly by state-owned energy company Pertamina.

Pertamina operates only six refineries, with the latest plant built almost two decades ago. The refineries process only 1 million barrels a day — less than two thirds of Indonesia's fuel consumption — forcing the country to import more expensive fuel from abroad, instead of importing crude oil to process it at home.

Pertamina's ability to expand its refineries is limited. To upgrade its Cilacap refinery in Central Java, Indonesia's largest oil processing facility, Pertamina had to cooperate with Saudi Arabian oil company Saudi Armaco.

"We need to optimize private sector participation in building domestic refineries," Sujatmiko, communication and public information head at the Energy and Mineral Resources Ministry, said on Friday (18/11).

Under a ministerial decree, which was signed into effect by Energy and Mineral Resources Minister Ignasius Jonan on Nov. 10, private companies can now build domestic refineries and apply for tax incentives from the government.

Private companies are also allowed to import crude oil to supply their refineries, Sujatmiko said.

In order to attract investors quickly, the government will also allow private enterprises which already possess the proper infrastructure to distribute fuel to sell it direct to customers.

In the past decade, lack of new investment in oil exploration has led to a decline in Indonesia's crude oil production. Only 786,000 barrels per day were being produced in 2015, a drop of 21 percent compared to 1 million barrels in 2006.