If Indonesia wants to be ndependent, it should build its own refineries to fulfill country's fuel needs.
Adequate operational oil refineries are vital infrastructure if Indonesia aim to be energy independent country. However it is not to easy to build a refenery as consideration must be given not only to their value in contributing to energy security but also for its economic value and return on invesment.
The economic value of an oil refinery is calculated from the revenue generated minus the cost of procurement of raw materials (crude oil) and variable costs, including fuel. The result is known as refining margin (RM). However, RM is very volatile and follow s the fluctuations in market prices for crude oil and refinery products. In essence, it is difficult to calculate the profitability of a refinery business' investment. So If it is not easy to build a refinery, how about increasing the capacity of the existing refineries?
The state-owned oil and gas company, PT Pertamina (Persero) has made a lot of studies about the possibility of adding capacity to its refineries . The Company has also signed a memorandum of understanding with some crude oil producing countries like Saudi Arabia, Libya, Iran, and Kuwait. Many are private parties who are interested in investing in the construction of refineries.
Vice President of Communications Pertamina, Ali Mundakir said that the oil refinery business profits are slim. However, given the increasing fuel consumption every year, a new oil refinery has to be built in Indonesia. "If we prioritize fuel security, we must add the refinery as needed," he said.
By the end of 2012, estimated fuel consumption will reach more than 44 million kiloliters. Member of BPH Migas, Ibrahim Hashim said, until the first half of 2012, fuel consumption has reached 21.6 million kiloliters, or a 4% increase of the quota during the same period last year at 20.7 million kiloliters.
According to the Vice President of Indonesia Petroleum Association (IPA) Sammy Hamzah, if Indonesia really wants to be independent, Indonesia should build a refinery for its own needs. "With the average fuel consumption in Indonesia of over 1.2 million barrels per day, it is clear that existing refining capacity is lacking," he said.
Although the need for a new refinery is necessary, until now it has not been built. Also, the addition of existing refining capacity has yet to materialize, and it should be noted that another benefit of having a new refinery in Indonesia is that it will decrease the dependency of the country on overseas refinery operations and fuel markets .
Even though the dependence on imported crude oil has increased, the market is more stable and the supply is more assured through the involvement of oil producers in the oil refinery investments and the guaranteed long-term purchase contracts that are made from "government to government".
The Director General of Oil and Gas and Mineral Resources Ministry Evita Legowo mentioned that one of important considerations to build a refinery is to secure the land and that if the land for construction is still under review, it does not means that the commitment is being postponed.