Indonesian Government Tenders Construction of Oil Refinery Project

The oil refinery, which is designed to have a production capacity of 300,000 barrels of oil per day (bpd), will be constructed in Bontang because supporting infrastructure in that area is already adequate and it is considered a strategic location in the context of the distribution of crude oil and derivative products. The government has allocated a 700-hectare piece of land to the project.

Investors are invited by the Indonesian government to visit the location in Bontang at the end of March 2014. Reportedly, 38 international investors have already shown interest in the project. In total, the project will require investments worth of - at least - USD $100 million.

Currently, Indonesia has six crude oil refineries, which process a combined 1.03 million bpd:

1. Dumai (Riau); 170,000 bpd
2. Plaju (South Sumatra); 118,000 bpd
3. Cilacap (Central Java); 348,000 bpd
4. Balikpapan (East Kalimantan); 260,000 bpd
5. Balongan (West Java); 125,000 bpd
6. Kasim (West Papua); 10,000 bpd

However, because of a lack of investments in oil exploration, Indonesia's domestic oil production has declined steadily for more than a decade, thus fueling the need for oil imports to meet rapidly increasing domestic oil demand. This puts pressure on the country's trade balance, current account, rupiah exchange rate as well as the government's budget balance (as it continues to subsidize a significant portion of domestic fuel prices).

Further Reading:

• Without Reform, Indonesia's Oil Imports Reach 1.6 Million Bpd by 2020
• Overview of Oil Production in Indonesia

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