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NEWS UPDATES 22 June 2009

South Korea's STX in refinery talks with Indonesia’s Pertamina

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South Korea's STX Corp is in talks with Indonesia's state oil firm, Pertamina, on joining a $3 billion oil refinery project in Southeast Asia's biggest economy, Reuters quoted a Pertamina official as saying Monday.

Pertamina signed a preliminary deal last year on a joint venture to build a new refinery with the National Iranian Oil Refining and Distribution owning a 40 percent stake, Pertamina 40 percent and a Malaysian partner 20 percent.

The refinery in Banten province in Java, which is due to come on stream in 2015, would have a capacity of 150,000 barrels per day in the first phase.

"STX has shown interest in participating in the refinery in Banten. We are in talks on a partnership with STX in the refinery," Pertamina's processing director, Rukmi Hadihartini, said via a telephone text message.

Originally, Pertamina had planned to build a 300,000 bpd refinery with Iran, but given limitations on the amount of crude oil likely to be available for feedstock it decided to initially build 150,000 bpd.

Another Pertamina official said the refinery would require an investment of around $3 billion, but seeking loans to finance such a project was tricky because of the global financial crisis.

"By bringing another partner into the refinery it will reduce the burden of investment by the company," said the official, who declined to be identified.

Pertamina has announced ambitious plans to raise its refinery capacity by 70 percent in an effort to curb costly oil product imports by Southeast Asia's biggest economy.

The firm's nine refineries have a combined capacity of around 1 million barrels per day (bpd). But they only supply 70 percent of domestic oil product consumption, and 30 percent comes from imports.

Indonesia has previously signed initial agreements with countries such as Iran and China on new refineries but so far none has materialised and some officials and analysts have said the downstream sector is not attractive for investors.

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