Saudi Aramco, Pertamina said to ink refinery deal this week

Saudi Arabian Oil Co. (Saudi Aramco) and Indonesia’s state-owned oil and gas company Pertamina are expected to sign this week an agreement related to the upgrade of the South Asian country’s largest refinery complex, Pertamina’s finance director Arief Budiman told Reuters on Monday.

Under the terms, Saudi Aramco will conduct a Front-End Engineering Design (FEED) for the upgrade to the 270,000 barrels per day (bpd) Cilacap oil refinery in central Java. The total value of the upgrade project is estimated at $5 billion.

The move is a major step towards forming a joint venture between the two firms, which is set to be finalized by the end of this year.

The exact ownership terms of the joint venture have not yet been disclosed; however, Pertamina plans to hold a majority stake. The agreement is also said to include a deal to import Saudi crude oil, which would be used at the Central Java refinery and other facilities in the country.

Last week, the kingdom-based Makkah newspaper reported that Saudi Aramco and Pertamina were negotiating a $10 billion contract to build a joint refinery in Indonesia. The facility would have a capacity of 300,000 bpd.

Indonesia is set to officially rejoin OPEC in December, six years after the country’s membership was suspended.