Indonesia ends Pertamina’s monopoly on oil refining

Under a ministerial decree, which was signed into effect by Indonesia’s Energy and Mineral Resources Minister Ignasius Jonan, private companies can now build oil refineries and apply for tax incentives from the government, ending the monopoly held by Indonesia’s state-owned oil and gas company Pertamina.

Pertamina currently processes 1,046.70 thousand barrels per day of crude oil, which supplies less than two-thirds of Indonesia’s domestic fuel requirements, at six refineries—Dumai, Plaju, Cilacap, Balikpapan, Balongan and Kasim.

“We need to optimize private sector participation in building domestic refineries,” said Sujatmiko, communication and public information head at the Ministry of Energy and Mineral Resources.

In the past decade, lack of new investment in oil exploration in Indonesia has led to a decline in domestic crude oil production by 21% from 2006 to 2015. Thus, private companies will also be allowed to import crude oil to supply domestic refineries, Sujatmiko said.

To immediately attract new investors, the government will also allow private companies to directly distribute fuel to customers, on the condition that they have sufficient infrastructure in place.