Saudi Aramco Asia Co Ltd (SAAC), a subsidiary of oil giant Saudi Aramco signed an initial deal with Indonesia’s state energy firm, PT Pertamina to look into building a refining and petrochemicals project in Indonesia, Aramco said on Saturday.
Aramco has said a refinery in Indonesia was among other planned refining projects which would raise its total global refining capacity to 8 million barrels per day (bpd) in a decade as it seeks to balance its energy portfolio by increasing downstream investments.
Under the Memorandum of Understanding (MOU), Aramco and Pertamina will undertake a feasibility study first to jointly build a refinery and petrochemicals project in Tuban in East Java.
The refinery would process 300,000 bpd of crude mainly supplied by Aramco via a long-term agreement to produce oil products and petrochemicals which will meet rising demand in Indonesia and countries in southeast Asia, Aramco said on its website.
“This MOU is a significant first step in extending our already strong relationship with Pertamina, and is also part of Saudi Aramco’s strategy to enhance its global downstream presence,” said Dawood M. Dawood, Saudi Aramco’s vice president of marketing, supply and joint venture coordination.
Aramco’s CEO Khalid al-Falih has said repeatedly that, while other companies are reducing exposure to the refining business, Aramco sees it as a growth industry. The oil firm sees the integration between refining and petrochemicals as boosting profitability.
Aramco did not say when the feasibility study of the project in Indonesia was due to be completed.
A former OPEC member, Indonesia is now a net importer of oil and its growing domestic fuel demand has made it into one of Asia’s top oil products buyers.
Last year, it said top Middle Eastern oil-producing countries had expressed interest in participating in two proposed new oil refineries in Indonesia.
“The Tuban refinery and petrochemicals project is part of Pertamina’s plan to improve Indonesia's energy security,” said Afdal Bahaudin, Pertamina’s director for investment planning and risk management.