Pertamina Needs Rp.672 Trillion In The Construction Of 5 Refineries, Where Does The Fund Come From?

Illustration. (Photo: Pertamina)

JAKARTA - PT Pertamina (Persero) still needs a large amount of funding in the refinery development and construction project which is being proclaimed by the largest oil and gas company in the country.

Pertamina President Director Nicke Widyawati said that his party remains committed to carrying out the mandate of the government to work on four Refinery Development Master Plans (RDMP) and one Grass Root Refinery (GRR).

Nicke said that the development aims to reduce the trade balance deficit, which is contributed by the oil and natural gas sector. According to him, the construction of the five refineries is considered sufficient to stop imports of fuel oil (BBM), even more than for later export.

"With the construction of these five refineries, it means that by 2026 we will no longer import gasoil. In fact, our stock is excess and can be exported. Then we only need to import gasoline," said Nicke during a hearing with Commission VII of the DPR on Wednesday, June 1.

Meanwhile, CEO of Refinery & Petrochemical Subholding (PT Kilang Pertamina Internasional) Ignatius Tallulembang explained that in the construction process there were a number of challenges. One of the challenges is the enormous investment value.

From the large investment value, there are other derivative challenges, namely, the complexity of finding strategic partners and the marginal profitability of the refinery business which have become the toughest challenges in the last 25 years. As for the entire refinery project, said Ignatius, the investment value that must be disbursed is US $ 48 billion or Rp.672 trillion (exchange rate of Rp.14,000 per US dollar) in the next 6-7 years.

Not to mention that when they operate, the refineries will absorb an operating budget of 20 billion US dollars each year. According to Ignatius, Pertamina will disburse a budget of 40 percent of the total investment, and the rest will be absorbed from external funding.

"Of course this requires a large investment. Therefore, multiple funding is needed in the form of partnerships, bonds or debt securities, etc. to support the achievement of funding for this big project development," he said.

The Balikpapan Refinery RDMP project continues to show positive progress. This project is still on the track to ensure that national energy resilience and independence can be realized soon. https://t.co/YsSyN40Faq#energitakberhenti#BUMNforIndonesia#PertaminaSiagaCovid19#CovidSafeBUMN pic.twitter.com/taGQTdEVZi

- PERTAMINA (PERTamina) May 28, 2020

For this reason, in addition to mitigating business risks, finding strategic partners can be a source of Pertamina's capital. However, along the way, cooperation with these partners was not entirely smooth, such as Pertamina's cooperation with Saudi Aramco.

In addition, he continued, other business risks are often upstream and midstream. As an illustration, Ignatius referred to the explosion and fire incident on the Deepwater Horizon oil rig in the Gulf of Mexico, about 50 miles off the coast of Louisiana, United States. As a result of this incident British Petroleum (BP) the British oil giant collapsed.

"This business has high risks, such as unscheduled shutdowns, explosions, and so on. The Deep Water Horizon in Mexico resulted in 11 deaths, BP almost went bankrupt," he said.