JAKARTA, April 20 (Reuters) - A $1.5 billion refinery join venture between Indonesia’s Pertamina and Japan’s Mitsui & Co (8031.T) may stall because Jakarta wants the state oil firm to lift its stake, a source familiar with the project said on Monday.
Pertamina said previously a preliminary agreement had been reached to build a residue fluid catalytic cracking unit (RFCC) with a capacity of around 60,000 barrels per day (bpd) of gasoline in its existing Cilacap refinery in Central Java.
Under the agreement, Pertamina would take a 20 percent stake in the project and Mitsui 80 percent.
“The government has asked Pertamina to review the project and Pertamina should have a higher stake,” said the source, who declined to be identified.
The source said it would be “difficult for Pertamina to have the biggest share in such a big investment.”
“I think the project (will) go nowhere now,” the source said.
To ask Pertamina to seek a higher stake, could “harm the financial support from the Japanese side,” the source said, noting that financing had already been approved by the Japan Bank for International Cooperation.
Pertamina’s corporate secretary Toharso said he was not aware of any new developments on the project.
Pertamina had previously said the construction of the RFCC project was due to start by 2008 at the latest and expected it to begin operations in 2010.
Pertamina’s Cilacap refinery has two crude distillation units with a capacity of 118,000 bpd and 230,000 bpd, respectively.
The refinery also has a 29,000-bpd, gasoline-making reforming unit and a 50,000-bpd visbreaker.
The biggest gasoline-making facility in Indonesia is Pertamina’s 83,000-bpd residual cracking unit at its Balongan refinery.
Indonesia, Asia’s biggest gasoline importer, has nine oil refineries with a total combined capacity of around 1 million barrels per day (bpd), but about 30 percent of the country’s oil products consumption is still imported.
President Susilo Bambang Yudhoyono has urged Pertamina to build new refineries to cut imports of oil products, but it has been struggling to attract new investment.
Construction of new refineries has become more pressing in the past few years, as growing demand has forced Pertamina to import more fuel, straining the budget and weighing on the rupiah currency IDR=. (Reporting by Muklis Ali; Editing by Ed Davies)