Indonesian news agency Antara reported Nov. 30 that SK has entered an agreement to build a plant in cooperation with PT Pertamina, the archipelago-nations state-owned oil and gas company. The report said the plant will be located in Dumai, on the central northern coast of Sumatra, and that it will have capacity to make 350,000 metric tons of Group III oils per year (6,800 barrels per day).

An insider at SK, who spoke on condition that he not be identified, confirmed for Lube Report yesterday that the two companies are in discussions but said a final agreement has not been inked. Officials with Pertamina could not be reached for comment.

Antara attributed its information to Djaelani Sutomo, general manager of Pertaminas Lube Base Division, quoting him as saying the companies signed the agreement for the project recently. The agency said the plant is scheduled to open in 2007.

SK is the worlds largest producer of Group III base oils. The company has two plants at its massive oil refining complex in Ulsan, South Korea, with total capacity of 17,000 b/d, including 14,000 b/d of Group III. The company opened the second plant in July of 2004 and officials said at that time that they were already contemplating another project outside of South Korea.

SK and fellow South Korean refiner S-Oil have brought large volumes of Group III to the global market in recent years and found robust demand for them. Seeing the growing demand for more highly refined oils, numerous other companies have announced plans to build Group II and Group III plants. Most are on the Pacific Rim, including projects announced by Malaysias Petronas, Taiwanese refiners Chinese Petroleum Co. and Formosa Petrochemical, and South Korean joint venture GS-Caltex.

Pertamina is Indonesias largest producer of finished lubricants and currently makes Group I base oils at its refinery in Cilacap. That base oil plant has capacity of 8,600 b/d. The company has a 120,000-b/d fuels refinery at Dumai.