Indonesia wants Shell refinery for share in Natuna-D Alpha

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Feb. 10 -- Royal Dutch Shell PLC could improve its chances of participating in the Natuna D-Alpha Block by transferring its refining operations to Indonesia from Singapore, according to a state official.

After meeting with Dutch Prime Minister Jan Peter Balkenende, Muhammad Lutfi, chairman of Indonesia's investment coordinating board, said, "We offered the prime minister the possibility to move Shell's facilities from Singapore to Batam."

Lutfi, accompanying Indonesian Vice-President Jusuf Kalla on a state visit to the Netherlands underscored the quid pro quo.

"If Shell were to accept our proposal that they move their fuel refinery operation from Singapore to Indonesia, I guarantee Shell would have greater bargaining power vis-a-vis other [companies]," said Lutfi, who added that ExxonMobil, StatoilHydro, and China National Offshore Oil Co. also are interested in the Natuna D-Alpha block.

Earlier during the visit, Kalla said Shell already had expressed its readiness to relocate its oil refineries to Indonesia. That apparently was supported by a report in Biznis Indonesia, which quoted Shell officials as being upbeat at the prospect. "We are ready to enter the refinery business," said Shell CEO Jeroen van der Veer.

Shell built Singapore's first oil refinery in 1961 and announced plans in July 2006 to proceed with the construction of a new world-scale ethylene cracker on Bukom Island and a new world-scale monoethylene glycol plant on Jurong Island.

Relations between Indonesia and the Netherlands have strengthened in recent months, however, with both sides eyeing increased investment in the Southeast Asian nation's oil and gas industry.

Last month there were reports of Shell Indonesia's interest in the country's coalbed methane (CBM) industry and that the firm will work with state-owned PT Pertamina to develop CBM fields in South Sumatra, where it holds seven concessions.

Those reports coincided with a Jan. 20 announcement that Australian CBM specialist Arrow Energy had spun off a 10% stake to Shell in its overseas unit Arrow International, including interests in India, Vietnam, China, and Indonesia.

In January, prior to the sale to Shell, Arrow signed a preliminary agreement with PT Energi Pasir Hitam Indonesia (Ephindo) to farm in to the Sangatta CBM block in East Kalimantan.

Other developments
In other developments, Royal Vopak NV reached an agreement last October with Mitsui & Co. Ltd. to acquire its 95% shareholding in PT Pro-Intercontinental Terminals Indonesia (Prointal).

The remaining 5% of the shares in Prointal are held by PT Intimitra Pratamausaha, an Indonesian engineering and contracting company. The facility at the Merak Port will be named Vopak Terminal Merak. It operates as a chemical import terminal, providing storage and transshipment services.

Merak, one of the country's petrochemical hubs, is part of Bintan province in West Java. The terminal consists of 33 tanks with a total storage capacity of 76,900 cu m. There is existing land available to expand the terminal.

The Vopak-AKR Corporindo joint venture is building the Vopak Jakarta terminal to store oil products at Tanjung Priok Port, Jakarta. The first phase, 250,000 cu m of storage capacity, is scheduled for completion in the second half of this year.

Contact Eric Watkins at hippalus@yahoo.com.

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