Petronas and Pertamina Mull Base Oil Venture


Petronas announced Wednesday that it has agreed with Pertamina to explore the possibility of the companies building a base oil plant at Pertamina’s fuels refinery in Cilacap, Indonesia.

The companies aim to make a final investment decision on a project by 2025, but the news release that Petronas issued Wednesday did not discuss a timeline for construction nor specifics of what a plant might produce.

If it comes to fruition, the deal would partner two Southeast Asia companies that are already players in the global market for API Group III base stocks. Petronas owns and operates a plant in Melaka, Malaysia, with capacity to make 268,000 metric tons per year of Group III oils plus 50,000 t/y of Group II. Pertamina owns 35% of a Dumai, Indonesia, Group III joint venture with capacity of 487,000 t/y and has a Group I plant at the wholly owned Cilacap refinery.

The news release did say that a joint venture plant at Cilacap would be a greenfield project, meaning separate from the existing plant there. One analyst speculated that it would make base oils that are at least Group II.

“Given that both of the companies are already involved in Group III facilities, it’s likely that this project would make at least Group II and possibly Group III if they agree to proceed,” H. Ernest Henderson, President of United States-based K&E Petroleum Consulting, told Lube Report today. “Right now the plant at Cilacap makes Group I, so they would have to install some type of processing technology if they want to upgrade the type of base oil made there.”

Pertamina, which is the national energy company of Indonesia, previously tried to work with another partner to upgrade base oil production at Cilacap. In 2015 it signed a heads of agreement with Saudi Aramco to develop a plan that would have included installation of a fuels hydrocracker and an upgrade of the existing base oil plant as part of a broader expansion of the overall fuels refinery. The companies never finalized the deal, however, and in 2020 Pertamina said discussions had ended and that it would proceed without Aramco, possibly seeking a new partner.

For several years the Indonesian government has set a goal of doubling the nation’s oil refining capacity in order to reduce its dependence on fuel imports. So far the campaign has made little progress. Current capacity is 1.1 million barrels per day, which has barely changed since 2007.