PERTAMINA NEED 51%
JAKARTA, Indonesia—State-owned Indonesia oil company PT Pertamina hopes to take a majority share in a near-$14 billion Indonesia-refinery venture with OAO Rosneft, people with knowledge of a pending deal said Thursday.
Pertamina seeks a 51% stake in the venture to build a crude-oil refinery and petrochemical plants in eastern Java, with Russian state-controlled oil major Rosneft taking the remainder, Pertamina executives and Indonesian officials said. The refinery will be capable of processing 320,000 barrels of oil a day, and the complex will require $13 billion to $14 billion in investment, they said.
Russian crude oil would supply the refinery, and the deal could also include Pertamina's taking minority stakes in Russian oil fields.
A nonbinding agreement to advance a partnership would be announced Thursday evening, the people said.
The deal, floated as a possibility during President Joko Widodo's trip to Russia last week, would represent a massive increase of Russian investment into Southeast Asia's largest economy. In the past two years, Russian companies have made investments of about $4 million in Indonesia, according to Indonesian government figures.
It would also signal a leap forward in Indonesia's downstream capabilities. Southeast Asia's largest oil producer has long had to import petroleum fuels because its refining capacity falls short of rising consumption. For years it has tried to draw the interest of international companies to invest in refineries.
Rosneft didn't immediately reply to a request for comment. Pertamina spokeswoman Wianda Pusponegoro confirmed that Pertamina would take a majority stake in the project.
Indonesian Trade Minister Tom Lembong said the "potential partnership" is in line with a strategy to diversify international trade. "Sourcing more of our petroleum from Russia reduces any potential overdependence on crude oil from the Middle East," Mr. Lembong told The Wall Street Journal.
He described the deal also as part of Mr. Widodo's effort to develop Indonesia's basic industries like steel and petrochemicals. That will reduce the need to import raw materials when economic growth picks up, he said, preventing damage to the country's trade and current-account balances and staving off "a classic overheating of the economy."
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