Indonesia plans quick-to-build oil refineries for US crude, doubts persist

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By Fransiska Nangoy and Jeslyn Lerh Indonesia plans to build a network of small modular refineries to process U.S. and domestic oil, aiming to reduce gasoline imports, but analysts warn the switch in strategy from large-scale refining facilities could prove uneconomical.The prefabricated refinery units, which can be constructed faster and more cheaply than traditional plants, will help Asia's largest importer of gasoline meet domestic demand and its commitment to increase U.S. imports.Indonesia's focus on small refineries runs counter to the global trend of ever-larger crude processing facilities that maximise economies of scale, analysts say.Reuters reported last month that Indonesian sovereign wealth fund Danantara planned to sign an $8 billion contract with U.S. engineering firm KBR Inc for 17 modular refineries, citing sources and an official economic ministry presentation.Danantara has not commented directly on the deal and KBR did not respond to Reuters requests for comment.Indonesian officials confirmed the refinery plan, which was agreed as part of Indonesia's deal with Washington that includes a pledge to buy $15 billion worth of U.S. energy products for reduced tariffs on Indonesian goods. "We will import crude oil into Indonesia and that will require refineries that match the characteristics of U.S. crude, so we invest accordingly," Danantara CEO Rosan Roeslani told reporters at a conference last month, adding that details were still being discussed.Deputy Energy Minister Yuliot Tanjung said there were plans to locate the refineries close to oil production sites.Initial studies for modular infrastructure and oil storage facilities have been conducted in Natuna, Surabaya, North Halmahera and Fakfak, among others. The planned projects were among those proposed to Danantara for funding, Yuliot said.Indonesia's total oil and gas imports stood at $36.28 billion in 2024, official data showed.FEASIBILITY CONCERNSAnalysts have expressed caution over the feasibility of the strategy, citing Indonesia's historical challenges in expanding its refining capacity.Indonesia's Pertamina has plans to invest $48 billion to upgrade six refineries and construct a large refining and petrochemical complex to double the state-owned firm's oil products output to 1.5 million barrels per day (bpd). Pertamina initially partnered with major global companies for the project...

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