Indonesia plans to build 18 refineries with a total capacity of 1 million barrels

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Indonesia plans to build refineries with a total capacity of 1 million barrels per day at 18 locations in the country, along with oil storage facilities at the same locations.The refinery project is expected to invest 160 trillion rupiahs and storage facilities 72 trillion rupiahs. It is expected to provide 50,960 new jobs for the society, reduce fuel imports, save foreign exchange, and enhance the country's energy security and economic resilience. Construction sites include Lhokseumawe, Sibolga, Natuna, Cilegon, Sukabumi, Semarang,Surabayaand 18 other regions. As the investment management agency, Danantara is seen as the new hope for the realization of the project and is involved in all key aspects of the project. They were responsible for refining the pre-feasibility study; determining financing options, project prioritization, business model and implementation entities; selecting the construction site and preparing for groundbreaking; and expediting the resolution of permitting, land preparation, social and environmental mitigation issues. He believes that Danantara's involvement has revitalized the project and helped to address issues such as financing and supply chain. He is optimistic about the project, noting that Indonesia has experience in building 1 million b/d refineries prior to 1994, and that the current project is included in the Priority Plan, which is more mature in terms of political, financial and investment priorities.

The Chairman of the Investment Committee of the Association of Indonesian Oil and Gas Enterprises supports the construction of refineries as a way to reduce fuel imports and benefit the population. He warned of the need to accurately calculate the economics of the project to prevent the risk of cost overruns, and questioned the location of refineries, saying that most are located outside of Java, which could increase logistical costs, and that small refineries have poor economics and should be considered for economies of scale.Danantara's chief executive officer said that they are willing to finance 18 priority downstream projects through Danantara's own sources of financing, relevant state-owned enterprises, public-private partnerships, etc. He prefers to cooperate with domestic and foreign companies, especially in need of advanced foreign technology to guarantee the implementation of investment projects. Historically, there have been cases of significant cost overruns on similar projects, such as the RDMP Balikpapan project, where the cost of the project increased from about US$4 billion to US$7.4 billion, and there is a need to be wary of a recurrence of this type of situation. The distance of the selected site from the main consumer market (Java) may lead to higher logistics costs. The high capital requirements of the project require cooperation and risk sharing to avoid complicating the project's economics with new loans.

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