Pertamina`s Refining Development Master Plan (RDMP)

Pertamina Energy Outlook 2015
“Building world-class refining capacity
for Indonesia’s energy needs”
By :
Iriawan Yulianto
SVP Business Development
PT Pertamina (Persero)
Jakarta, 3-4 December 2014
CONFIDENTIAL AND PROPRIETARY
Any use of this material without specific permission of Pertamina is strictly prohibited
PT Pertamina (Persero)
Jln. Medan Merdeka Timur No.1A Jakarta 10110
Telp (62-21) 381 5111 Fax (62-21) 384 6865
http://www.pertamina.com
Contents
▪
Strategic Challenges
▪
Refinery Development Master Plan (RDMP)
▪
Grass Root Refinery (GRR)
PERTAMINA | 1
STRATEGIC CHALLENGES
Pertamina Refining face both external and internal challenges to achieve
its strategic aspiration
External challenges
▪
Feedstock
supply
▪
▪
Refining market
▪
▪
Security
of energy supply
▪
Refinery
configuration
Internal challenges
▪
▪
Domestic crude availability will decrease and only able to cover less than 50% of
Pertamina’s total refining capacity
– Domestic crude production is projected to decline by ~27% between 2012 and 2020
– In 2020 domestic crude’s total entitlement volume is only 449 MBD, which is less than 50%
of total refining capacity
Pertamina will increasingly import crudes that are more sour, driving the need to release
sulfur constraints to maintain competitiveness
– In 2020 sour crudes will account for ~77% of the total production capacity for import crudes
– Sour crudes are cheaper than sweet crudes, therefore driving Pertamina’s need to release
sulfur constraints to maintain competitiveness
Indonesia’s demand for gasoline and diesel will continue to grow significantly
– Gasoline demand will grow by about 8% per year from 2012 to 2025
– Diesel demand will grow by about 5% per year from 2012 to 2025
Product quality specifications will become more stringent in the next 5-10 years1
Indonesia and ASEAN will be short in gasoline and diesel2, hence potentially requiring
Indonesia to import from sources outside ASEAN
– Indonesia will continue to have growing gasoline and diesel deficit
– ASEAN will also be in deficit for gasoline and diesel
There is government support for increasing domestic production of gasoline and diesel
to limit dependency on imports
Going forward refineries will have to increase its complexity and sulfur handling capacity
to become more competitive
SWOT analysis reveal various opportunities for GRM improvement
– There is a need to increase GRM across most RU
– Each RU has different key focus based on their SWOT
1 Based on UNEP, FACTS and McKinsey analysis
2 Not including new refineries and RDMP initiatives
PERTAMINA | 2
1 Indonesia’s domestic fuel product coverage is low, posing risks in
security of energy supply
Domestic fuel product coverage1
Percent
2013
48
58
44
PTT/SA2
coverage
2025
71
103
121
109
RAPID3
coverage
118
87
38
37
63
IDN
AUS
VNM
93
112
125
60
MYS
CHN
THA
JPN
181
185
TWN
262
194
Full
coverage
224
206
Full
coverage
SGP
KOR
▪ Indonesia’s domestic product coverage is substantially low compared to other
▪
neighboring countries and can potentially pose a threat in security of fuel products
Increasing the domestic production will increase the domestic fuel product coverage
1 Production [gasoline, diesel, gasoil] / Demand [gasoline, diesel, gasoil]
2 Assumed 400 KBD refinery at 95% utilization; 50% of the production will be gasoline, diesel and gasoil
3 Assumed 300 KBD refinery at 95% utilization, 67% of production for petroleum products, and 67% of this will be gasoline, diesel and gasoil
SOURCE: ICIS Supply & Demand Database; Pertamina M&T (only for Indonesia 2030); Team analysis
PERTAMINA | 3
2 By 2025, Indonesia faces a significant shortage in refining capacity,
High case
Additional supply from RU IV RFCC
equivalent to ~5-8 refineries
Base case
Existing supply
Low case
Indonesia refinery product supply and demand 1
KBD
2,250
Scenarios
CAGR
Fuel
subsidy
reduction
Substitution of
gas/bio-fuel
based vehicles
No
change
None
Base 5%
50%
reduction
B10
Low
100%
reduction
B10 and NGV
GDP
growth
6.0%2
1,948
High
6%
4.9%
1,681
Equivalent
to ~4-8
worldclass
refineries3
1,050
541
12
541
12
529
529
529
2012-13
2020
2025
1 Includes gasoline, gas oil and diesel
3 Assumed each refinery produce 200 KBD of fuel products
SOURCE: Pertamina M&T, team analysis
3.7%
4%
▪ Estimated shortage by 2025
0.1%
is between 4 and 8 refineries
– High case: ~1,700 KBD
– Base case: ~1,400 KBD
– Low case: ~1,100 KBD
2 Based on base case demand scenario per Pertamina M&T
PERTAMINA | 4
2 Pertamina is implementing two programs:
RDMP and GRR to close the deficit
Refining Development Master Plan (RDMP)
Description
Supply
Demand
Grass Root Refinery (GRR)
Upgrading 5 existing refineries to increase
the capacity and competitiveness
Description
Building 2 new refineries to meet west and
east Indonesia’s growing demand
1,273
KBD
1,136
1,393
Fuel
product
demand1
and supply
after RDMP
946
X2.5
190
West2
KBD
1,136
529
Supply in 2013 Supply in 2025
Complexity
NCI4
BPP
% MOPS
Current
After RDMP
5
9
104
94
1 Base case
2 Region I to IV
5 Assumed utilization rate of 95%
SOURCE: Team analysis
East3
KBD
637
447
675
38
190
637
After
RDMP
GRR5
Total
supply
Demand
in 20251
3 Region V to VIII
4 Nelson Complexity Index
6 May be pushed to second phase
PERTAMINA | 5
Contents
▪
Strategic Challenges
▪
Refinery Development Master Plan (RDMP)
▪
Grass Root Refinery (GRR)
PERTAMINA | 6
Pertamina’s Refining Development Master Plan (RDMP) will transform
its refining business by upgrading up to 5 major refineries
PRELIMINARY
Dumai refinery
Balikpapan refinery
Plaju refinery
Balongan refinery
Cilacap refinery
Crude flexibility
Complexity
Product quality
Crude quantity
~2% S
8-9
EURO IV
x2
of crude flexibility
NCI
up from EURO II
increased capacity
Sulfur handling limit from
0.4% to ~2% S
Complexity improved
from 5 to 8-9
Gasoline from 500 to <50 ppm S
Diesel from 3,500 to <50 ppm S
From 820,000 BPD
to 1,610,000 BPD
SOURCE: Pertamina
PERTAMINA | 7
RDMP strategic partner selection process in currently in progress;
Pertamina would like to sign MOU with strategic partner(s) on Dec 10
Mar, 2014
Jun, 2014
Aug, 2014
Nov, 2014
MoU sign
on Dec 10 Phase 1
(~2021):
▪
▪
▪
~400
companies
Phase 2
(by 2025):
▪
▪
30 companies
Criteria
Balikpapan
Balongan
Cilacap
Preliminary
screening
13 companies
RFI1
acceptance
6 companies
RFI response
and roadshow
Dumai
Plaju
4 companies
Due diligence
1 Request for information
SOURCE: Pertamina
PERTAMINA | 8
The RDMP landscape across Indonesia would have
different regions in the accelerated scenario
Sumatra
XXX
RDMP
XXX
GRR
Kalimantan and Sulawesi
Dumai
Balikpapan
Plaju
Balongan Cilacap
West and
Central Java
SOURCE: Team analysis
Tuban
East Java and
NTT and NTB
PERTAMINA | 9
Pertamina would like to sign an MOU with strategic partner(s) by our
anniversary (Dec 10)
2014
Activity
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jun 13th: expression of interest required
Market sounding
Site visits
Jul 25th: site visits finalized
Clarification stage
Jul 25th: response to RFI required
Oct 30th: due
diligence finalized
Due diligence
Partnership decision
Dec 10th
Signed MOU
BFS and partner
selection
Heads of
Agreement
BED / FEED
(Q2 2015- Q4 2016)
(2013-2014)
(Q1 2015)
JV Establishment
(Q2 2015- Q4 2016)
SOURCE: Pertamina
Final
Investment
Decision
(Q1 2017)
EPC Contractor
Selection
EPC
(Q2-Q4 2017)
(2018-2021)
PERTAMINA | 10
Contents
▪
Strategic Challenges
▪
Refinery Development Master Plan (RDMP)
▪
Grass Root Refinery (GRR)
PERTAMINA | 11
4 5 key success factors for a world-class refinery in Indonesia
Scale and
A
complexity
Description
Suggested guideline
▪
Fully leverage economies
of scale to be competitive against
imports
▪
▪
Minimum 300 KBD
Minimum complexity of 10
▪
Close to demand center; minimal
exposure to earthquakes
▪
▪
West Indonesia: Tuban
East Indonesia: TBD
▪
Minimum size of land to build an
integrated world-class refinery with
petchem complex
▪
▪
Minimum 500 hectare
Government land acquisition
and/or reclamation
▪
Balance between security of supply
and uncertainty on market price
Flexibility to review the terms of
long-term contract
▪
~60% through long-term
contract at international
market price and ~40% at
spot
Petrochemical complex integrated
with GRR to boost economics
▪
Integrated petrochemical
complex with GRR with
aromatic and olefin
B Location
C Land
D Feedstock
▪
▪
E Petchem
PERTAMINA | 12
4 MoU with Saudi Aramco on Tuban refinery in West Indonesia
while location is being scouted for East Indonesia
Highly attractive
Opportunity exist
Supply and base case demand of products1 at 2025 after RDMP, in KBD
Region VI : Kalimantan
Region VII: Sulawesi
Region I: North Sumatra
316
273
263
RU II Dumai
Not attractive
312
Demand
Region VIII: Papua
+39
-53
32
0
Region II: South
Sumatra
200
Supply
279
+79
Region III: West Java
RU III Plaju
504
2682
RU V
Balikpapan
-236 RU VI Balongan
Region IV: Central Java
East: currently
scouting for
locations in East
Indonesia
-32
RU VII Kasim
West: MoU with
Aramco on Tuban
refinery
Region V: East Java, Bali,
NTB & NTT
RU IV Cilacap
371
252
1363
1363
-116
West Indonesia
1 Includes gasoline and diesel
East Indonesia
2 Assumed Region III supplied by Balongan
SOURCE: Interim RDMP BFS result, Pertamina, team analysis
-235
3 Assumed Region IV and V supplied by Cilacap
PERTAMINA | 13
Grass Root Refinery (GRR)
Building World-Class Refining Capacity for Indonesia’s Energy Needs….
New Grass Root
Refinery in Bontang
with PPP scheme
(Government plan)
Bontang refinery
Tuban refinery
New Grass Root Refinery in
Tuban B to B scheme with
Aramco
Crude flexibility
Complexity
~2% S
10-12
of crude flexibility
NCI
Sulfur handling limit up to
~2% S
World class Complexity
SOURCE: Pertamina
Product quality
EURO IV - V
Crude quantity
300,000
BPD
Gasoline 10 - 50 ppm S
Diesel 10 - 50 ppm S
Can be increased to
400,000 BPD
PERTAMINA |
GRR progress and lessons learned
Additional challenges
Progress to date
Constraints
Iran
(Banten)
2008
MOU
signed
Kuwait
(Balongan)
2010
PPP
refinery
(Bontang)
SOURCE: Pertamina
Land access
High crude price
▪
▪
Land access
Limited government
incentives
BFS
completed
2010
MOU
signed
2011
Risk
assessment
study
completed
2012
BFS and
cost &
benefit
study
completed
2013
Market
study
completed
2014
Fiscal
study
completed
2014 ▪ Varying expectation
on investment
LoI issued
Iraq
Saudi
Arabia
(E. Java)
▪
▪
2012
2013
MOU Market &
signed location
study
completed
2013
Location and
configuration
study
2014
Configuration
study
completed
2014
▪
Land access
▪
Regulation update
– Refining as an
infrastructure
project for PPP
– SoE as project
owner of PPP
▪ Difficulties in
attracting investment
for private refinery
– Since 1990,
Investment
Coordination
Board has
issued +20 initial
investment
licenses
– No further
actions to
pursue the
investment due
to the marginal
return without
government
incentives
PERTAMINA | 15
Conclusion
1 By 2030, Indonesia will need 3-6 new refinery equivalents and Pertamina is
implementing 2 programs to close the gap
▪ RDMP: Upgrading up to 5 existing refineries, equivalent to 2 new refineries
▪ GRR: Building 2 new refineries in Indonesia
2 RDMP
▪ World-class strategic partners selected based on rigorous roadshow and due
diligence, signing of MoUs with Aramco, JX, PTT and Sinopec on Dec 10
▪ Phase 1 commissioning in 2020-2021 for Balongan, Cilacap, and Balikpapan;
Phase 2 commissioning by 2025 for Dumai and Plaju
3 GRR
▪ 5 key success factors for world-class GRR: Scale & complexity, location, land,
feedstock, and integration with petchem complex
▪ 2 new refineries pursued in parallel: in West Indonesia, Tuban Refinery with
Aramco; East Indonesian refinery location scouting in progress
PERTAMINA | 16
Thank You
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PERTAMINA | 17