The investment by Rosneft Singapore Pte Ltd, an affiliate of the Russian oil company Rosneft, in the strategic national project Grass Root Refinery in Tuban, East Java, is currentlyinterupted due to the escalating geopolitical situation resulting from the war in Ukraine.
A recent presentation by Minister of Investment/Head of the Investment Coordinating Board (BKPM) Bahlil Lahadalia on the 2023 Investment Performance reveals that Rosneft is among the companies which claimed to have resolved their investment issues with a potential investment of Rp211.9 trillion (equivalent to USD 14.8 billion).
Deputy for Investment Climate Development at the Ministry of Investment/BKPM Yuliot Tanjung said the facilitation provided by the BKPM to Rosneft was related to land acquisition issues for the construction of the Tuban Refinery project. However, he acknowledged that Rosneft’s investment is currently hindered by Western countries’ embargoes due to the Russia-Ukraine conflict.
Russia is known to face difficulties in continuing its investment due to sanctions from Western countries imposed after Russia’s invasion of Ukraine in early 2022. Sanctions against Rosneft target funding access, technology, and refinery construction services. Discussions are ongoing between PT Pertamina and Rosneft to determine the fate of the national strategic project, estimated to involve an investment of US$13.5 billion.
Chairman of the Committee for Accelerating Priority Infrastructure Provision (KPPIP) under the Coordinating Ministry for the Economy, Wahyu Utomo, said Pertamina is still seeking a strategic partner to support the Grass Root Refinery (GRR) Tuban project.
“Pertamina is still looking for a strategic partner to support the GRR Tuban project, both for technology and financing,” said Utomo.
He adde thatonce a new partner is found, Pertamina expects government intervention, both fiscal and non-fiscal, for the construction of the refinery, as the project’s value is significant while Pertamina’s equity is limited.
The Ministry of Energy and Mineral Resources (ESDM) has set a deadline for the final investment decision on the GRR Tuban until this year. Previously, Director General of Oil and Gas at the Ministry of Energy and Mineral Resources, Tutuka Ariadji, said that recent Western sanctions did not directly affect Rosneft. Therefore, he believes the project can still proceed to determine the final investment decision for the new refinery construction.
Minister of Energy and Mineral Resources Arifin Tasrif also sought clarification on Rosneft’s investment from the Russian Ambassador to Indonesia Lyudmila Georgievna Vorobieva last year. “I spoke with the Russian Ambassador to communicate, can Rosneft still do it? Can it still continue? If not, we will look for a replacement,” said Arifin.
Meanwhile, PT Kilang Pertamina Internasional (KPI) targets the final investment decision (FID) for GRR Tuban in March 2024. President Director of PT KPI Taufik Aditiyawarman stated that the company is preparing tenders for eight main engineering, procurement, and construction (EPC) packages related to the EPC-financing concept. Additionally, the company is working on financial advisor agreements with shareholders, including Rosneft.
“God willing, we can get the FID in March 2024,” said Taufik. The outcome of the FID will determine the fate of this national strategic project. GRR Tuban is expected to produce 300,000 barrels of oil per day (bpd) with EURO 5 quality products.