Bank of America Corp.’s BA Asia Ltd. said on October 20th that it will undertake a feasibility study for a $3 billion oil refinery in Indonesia, in an effort to meet the country’s growing domestic demand.
The privately financed project is the first not involving Indonesian state firm Pertamina and comes as the country is looking to deregulate its refining sector, as well as retailing and distribution of refined petroleum products. BA Asia is to carry out the project on behalf of a joint venture between local sponsor PT Minyak Pola Permai and Saudi Arabian-based Hitech International Group.
The study is expected to take up to nine months, with the full support of the Batam Island Authority and the approval of the Indonesian government. If the project is approved, the PT Kilang Minyak Batam refinery will be built on Tanjung Sauh Island, part of the Batam industrial and free-trade zone about 150 miles from Singapore.
The proposed refinery would have a capacity of 300,000 b/d and is intended to substitute for imports, making up for an estimated 150,000 b/d shortfall of middle distillates, including diesel, that accounts for about 50 percent of refinery production.
Tight supplies, ageing equipment and a decrease in new investment in the country due to Pertamina’s financial troubles have combined to limit refinery capacity. By 2002, Asian demand for refined products is estimated at nearly 850,000 b/d.