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To help develop the country's oil refining industry, the
government is considering providing tax holidays for firms willing to
construct new refining capacity.
Luluk Sumiarso, director general of oil and gas at the Energy and
Mineral Resources Ministry, said Monday that his ministry was engaged
in talks with other relevant ministries and the Investment Coordinating
Board (BKPM) so as to prepare specific arrangements.
"We have been discussing the issue for almost a month and the BKPM has
been very supportive of the idea," Luluk said, adding that the
incentives would likely take the form of exempting eligible firms from
all taxes during the construction phase.
The government hopes the proposal will attract more investors to the
sector and eventually help the country, which is now a net oil
importer, achieve self-sufficiency in oil supplies over the long run.
Indonesia currently has seven refineries, all of which are operated by
state-owned oil firm PT Pertamina.
The seven refineries boast a total installed capacity of 1.050 million
barrels of oil per day.
However, they only manage to produce around 722,000 barrels of refined
oil per day, meaning that the country has to import between 310,000 bpd
and 325,000 bpd in order to meet domestic demand, which stands at 1.030
mbpd.
According to the Directorate General of Oil and Gas, five private firms
have obtained licenses for the construction of refineries with a total
capacity of 2 mbpd.
Four of the firms -- PT Intanjaya Agromegah Abadi, PT Petroref Utama
Nusantara, Pertamina subsidiary PT Elnusa and PT Situbondo Refinery
industry -- are still at the engineering studies stage, while the PT
Kilang Muda refinery, located on the Musi river in South Sumatra, is in
the early stages of construction.
Iranian and South Korean investors are also reported to be exploring
the possibility of building refineries in Banten, West Java, and Dumai,
North Sumatra, respectively, although no significant progress has been
made so far.
Luluk added that later this week, the Directorate General would invite
refinery operators to a meeting to share views on what investors want.
Luluk also suggested that the companies establish an association.
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