Indonesia and Russia to construct $22b refinery in East Java amongst different tasks

Indonesian state-owned oil firm Pertamina

Indonesia and Russia are set to work together on several projects, even as the West is isolating Russia in response to its invasion of Ukraine.

Indonesian state-owned oil company Pertamina and Russia’s Rosneft Oil Company are going ahead with their project to build a refinery in the Indonesian province of East Java to produce fuel and raw materials for the petrochemical industry, a senior Indonesian government official told The Straits Times on Friday (July 1)

“The Russian party has been negotiating to get tax holidays. The project is still on track,” said the official, who supervises the project.

The two state-owned companies earlier formed a Jakarta-based joint venture, PT Pertamina Rosneft Pengolahan dan Petrokimia, which will manage the East Java’s New Grass Refinery Root (NGRR) in Tuban and have an output of 229,000 barrel per day of gasoline, diesel and jet fuel.

A pre-project planning phase has been completed for the US$16 billion (S$22 billion), which will be 45 per cent owned by Rosneft and 55 per cent by Pertamina.

When completed, the project will greatly help Indonesia reduce its reliance on imported fuel, which has been rising in price.

Widodo’s administration has resorted to adding more energy subsidies to keep fuel prices at pump stations affordable, a populist move observers see as necessary to keep social and political stability as many of Indonesia’s 270 million population are still reeling from the impact of the Covid-19 pandemic.

To make fuel prices affordable, the administration has increased energy subsidies this year to a staggering 502.4 trillion rupiah (S$46.8 billion), from the originally budgeted 152.2 trillion rupiah.

On Friday, the Russian embassy in Jakarta also said President Vladimir Putin offered to have Russian Railways invest in Indonesia’s new capital in Kalimantan. The new capital, named Nusantara, will see construction start in August after delays due to the pandemic.

Russian energy companies are also keen to come and invest in Indonesia, especially in developing nuclear power to provide electricity, Putin said during Widodo’s visit to Moscow on Thursday, according to the Russian embassy statement.

Indonesia has a power shortage, especially in regions in Kalimantan and Sulawesi.

Widodo visited Kiev on Wednesday before heading to Moscow to meet Putin, who on Feb 24 sent troops into pro-Western Ukraine. “Although the external situation is still difficult, it is still important to move towards a settlement and open dialogue,” Widodo said in Moscow.

Indonesia would like “the war to end soon”, Widodo said on Thursday, calling on “all world leaders to revive the spirit of cooperation”.

He also said he hoped for progress in reintegrating global food and fertilizer supply lines disrupted by the conflict, and offered to be a diplomatic bridge between the two nations.



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