Indonesia Explores New Investors for Tuban Refinery Amid Rosneft Delays

Indonesia’s Tuban refinery project, one of the nation’s most ambitious oil refinery undertakings, may see a shift in investors as the government faces ongoing delays from its Russian partner, Rosneft Oil Co PJSC. Minister of Energy and Mineral Resources, Bahlil Lahadalia, announced on November 14 that the government may seek alternative investors if Rosneft does not provide a clear commitment to advancing the project.

Currently, the refinery project is being managed as a joint venture between Indonesia’s PT Kilang Pertamina Internasional (KPI), a Pertamina subsidiary, and Rosneft. This partnership, however, is facing geopolitical challenges, and the Ministry of Energy and Mineral Resources (ESDM) has expressed a need for prompt progress. “We may need to look for new investors because we cannot wait indefinitely. We need a timeline,” Bahlil stated in Jakarta.

The Tuban refinery, with an estimated investment of $3.8 billion (approximately IDR 54.2 trillion), is designed to process up to 300,000 barrels of crude oil per day, producing roughly 30 million liters of fuel, including gasoline and diesel. It is set to play a crucial role in reducing Indonesia’s reliance on imported fuel and strengthening the country’s energy security. Indonesia has set the ambitious target of finalizing the Final Investment Decision (FID) for the refinery by the end of 2024, following delays from an original deadline in early 2025. The Ministry remains hopeful, but Indonesia’s Minister of Energy emphasized that if Rosneft’s commitment remains unclear, alternative investors will be considered.

The Acting Director General of Oil and Gas at ESDM, Dadan Kusdiana, confirmed that the Tuban refinery's FID is scheduled for November 2024, per Pertamina’s recent reports. Kusdiana also highlighted various obstacles the project has faced since its initiation, including land acquisition challenges, regulatory incentives, and licensing processes. Minister Bahlil, who previously served as Minister of Investment, was instrumental in addressing these initial hurdles to secure land for the project and facilitate early investment phases.

Despite these efforts, geopolitical uncertainties have delayed the project, compelling Indonesia to weigh alternative partnerships. Pertamina, meanwhile, has been evaluating Rosneft’s commitment and is in active discussions regarding potential outcomes for the Tuban project. “Pertamina, through its subsidiary PT Kilang Pertamina Internasional (KPI), is still collaborating with Rosneft to execute the Tuban GRR project,” confirmed Hermansyah from Pertamina on October 18.

Indonesia’s consideration of new investors is also linked to its broader goals of achieving greater energy security and reducing dependency on imported fuel. If Rosneft’s position remains uncertain, Indonesia’s government may explore partnerships with investors from regions less impacted by geopolitical tensions. Potential investors could come from countries with established oil and gas sectors, willing to support Indonesia’s growing energy demand.

The Tuban refinery, once operational, promises to boost Indonesia’s domestic fuel production capabilities significantly, aligning with President Prabowo Subianto’s vision for national energy independence. The facility is expected to be a cornerstone of Indonesia’s energy strategy, complementing other refineries and meeting a growing demand for high-quality, locally refined fuel.

As Indonesia re-evaluates its partnerships for this crucial project, the decision to potentially onboard new investors underscores the government’s determination to prioritize national interests and ensure long-term energy resilience.