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Indonesia's Pertamina may invest in overseas oil refinery for first time
[JAKARTA] Indonesia's state-owned energy company Pertamina may invest in an overseas refinery for the first time to help meet the rising fuel needs of Southeast Asia's largest economy, its new CEO told Reuters.
The quest for oil-processing capacity abroad is partly spurred by a dearth of investor interest in building refineries at home, a result of unfavourable investment conditions set by the government. Overseas assets have also become more affordable after benchmark oil prices slumped 50 per cent from their peak in 2014, slashing valuations.
"We may acquire a refinery overseas, but its (production) would be dedicated to us," Pertamina CEO Dwi Soetjipto said in an interview on Wednesday. "We will look for an opportunity now because a lot of (refineries) have been offered for acquisition."
For years, Indonesia's fuel output has suffered from a lack of investment in its refinery sector. The newest refinery was built in 1994. Because of high operating costs at its aging facilities, imported fuel is often cheaper than domestically produced fuel.
To re-balance that, the former Opec member has signed agreements with global energy firms to upgrade its refineries and build new facilities, hoping to double domestic fuel output by 2023.
Indonesia's fuel needs are rising 5 per cent a year from around 1.6 million barrels per day, of which Pertamina supplies around half from its six domestic refineries.
Mr Seoetjipto declined to comment on a budget for the plan to invest in a refinery overseas. He said Pertamina was also studying the option of being a shareholder in an existing refinery.
"We don't have to be the majority shareholder. It depends on how much (fuel) we can take," he said.
While tumbling oil prices have made overseas assets cheaper, they have also halved profits in Pertamina's upstream business. The firm is targeting its 2015 profits to slightly exceed the US$1.5 billion earned in 2014, said Mr Soetjipto, appointed to his role in November.
Indonesia's move to shift the burden of fuel subsidies to Pertamina has also cut into its capacity to invest, Mr Soetjipto said. In January to February, the firm lost US$72.5 million on fuel sold at prices set by the government below Pertamina's preferred level, he said.
Because of these "difficult conditions," Pertamina has cut its investment plans this year from US$7 billion to US$4.5 billion, Mr Soetjipto said.
Pertamina is also watching its trading arm Petral closely.
"If they can't bring added value we will just dismantle (Petral)," Mr Soetjipto said, noting Petral directors' salaries had already been halved.