The echoes of the decision to withdraw Saudi Aramco from its partnership with the Indonesian "Pertamina" have been hesitant in the political and economic circles in Indonesia for days.
The latest of these echoes is what the Indonesian minister of government companies, Eric Taher, said that it was necessary to resolve the partnership matter, indicating that it had not made tangible progress, at a time when it called "Pertamina" to search for other partners.
Aramco had informed Pertamina of its withdrawal from the partnership to develop and expand the Chilachab oil and petrochemical refinery in the south-south of Java Island, at an estimated value of about $ 6 billion.
And ending this partnership means Saudi Arabia's investment decline among the countries investing in Indonesia to 42nd, as its investments have remained below 6 million dollars annually in recent years.
According to previous statements by the Indonesian Ministry of Finance, this was the most important investment project for Saudi Arabia in the Indonesian market during this decade, compared to any project or agreement signed after the visit of the King of Saudi Arabia, Salman bin Abdulaziz, to Indonesia in March 2017, which the Indonesian-politicians commented on. Among them, the media and the economists - at that time high hopes.
However, after three years of this visit, not much of what was said then - according to Indonesian analysts - was accomplished, except for a slight increase in the volume of trade exchange, which was estimated at 4.6 billion dollars last year.
Achieving self-sufficiency
The communication between the two companies Aramco and Pratamina had started since 2014, before the partnership contract was signed on December 22, 2016, with the project to start implementation early next year, with the aim of raising the refinery's production capacity from 348 thousand barrels per day to approximately 400 thousand barrels.
The Chilachab refinery was built for the first time in 1974, while today it required modernization and diversification of what it produces in addition to petrochemicals.
The project was strategic for Indonesia, which currently imports about 800 thousand barrels per day out of a total of 1.4 million barrels consumed locally. It was included in a plan that was confirmed in a presidential decision issued in 2018 to develop a number of strategic projects, including building or developing and expanding the production of 6 refineries valued at the time. About 36.27 billion dollars, with the aim of stopping fuel imports by the year 2026. All these refineries are fields of Arab and foreign investment.
Besides Chilachap, there is a "Balungan" refinery on the northern coast of West Java Island, of which only 10% has been completed, and the Puntang and Balikpapan refineries east of Kalimantan State, the latter of which has been completed about 15%, while 40% are expected to reach 40%. With the end of this year.
As for the Pontang refinery, Pertamina announced earlier this month that it was postponing its implementation. In addition to those refineries, "Blagout" refinery in South Sumatra, and may be on the list "Dumai" refinery in Riau, and "Toban" refinery in East Java.
Difference in asset valuation
In her first press statement last Tuesday about the reasons that led to the termination of the partnership with Aramco, Pertamina said in the words of the general manager of the company Nikki Widyawati that the termination of the partnership would not affect the implementation of the projects it seeks to achieve, but rather expressed its concern that the continuation of these The partnership would have resulted in a loss for the country, due to the low value that Aramco estimated to launch this project.
Widiwati added that Aramco reduced its assessment of the current assets of the Chilachab refinery by more than one billion dollars, noting that it was better to end the partnership.
She added that if the project was implemented in the future in partnership with a foreign party wishing to invest in place of Aramco, it would be integrated with a petrochemical project in which the Taiwanese company "CBC" would contribute.
Speaking to Al-Jazeera Net, the Undersecretary of the Indonesian Ministry of Seas and Investment for Energy Sovereignty Affairs confirmed that Burbaya would like Sadia that the dispute was focused on assessing the assets that would have been used in this partnership, noting that despite resorting to a third evaluation body, this did not solve the dispute, and this hindered the completion of the partnership Or go ahead.
For his part, Fahmy Radi, an energy economist at the "Gajah Mada" university in Jogjakarta, central Java, said that the point of contention is to assess the assets that will be the basis for this partnership.
He added that the partnership between the two parties is old, and that Aramco initially requested financial incentives from the Indonesian government, which were rejected initially and then approved by the Ministry of Finance, including tax exemptions, and this means that Aramco's demands were met, noting that the negotiation lasted long.
The economist added that, according to Pertamina’s estimates, the value of the partnership is $ 5.6 billion, but Aramco provided a very low evaluation and was about 50% less, which is $ 2.8 billion, so no agreement was reached. He pointed out that although Pertamina changed some details of its offer, Aramco did not accept the new offer and decided to end the partnership.
Other factors related to Aramco
There is other data that played a role in the non-achievement of the partnership between Aramco and Pratamina, indicating in press statements to the CNBC Indonesian network that the decline in oil prices, according to the analyst at the Group Group Asia, which specializes in energy and mining, Ahmed Sharif Sheikh Abu Bakr. In these circumstances, investors made their accounts for investments in refineries.
He said that "Aramco faces internal problems, in addition to the decline in oil prices that affected them, then the volatility of the situation regarding Aramco's shares offering, and there is regional geopolitical tension and so on," noting that Indonesia remains attractive to invest in energy, but the time is not appropriate given To those reasons.
The oil and gas mafia
Besides, the title of "oil and gas mafia" reappeared again in what was published to explain the end of this partnership. The Undersecretary of the Indonesian Ministry of Seas and Investment said, "If we look at the scene as a whole, since President Jokoy took office in 2014, he set the goal of developing 5 refineries But that has not been done to this day. "
The Indonesian President had stressed the need to accelerate the expansion and development of oil refineries, which had not been completed new for 30 years, that is, since the last decade of the era of former President Muhammad Soeharto.
Indeed, according to media sources, Jokoy expressed his anger at a consultative meeting of the five-year development plan (2020-2024) on December 16th, and considered that what he had ordered from the start of developing and establishing new refineries about 5 years ago had not been implemented yet, indicating Until the failure to complete these projects is in the interest of parties who want Indonesia to remain an importer of oil and its derivatives. He said he had asked the judiciary, police, prosecutors and the Anti-Corruption Commission to investigate this matter.
Here Fahmy Radhi says that he was a member of a team to combat the oil and gas mafia headed by the well-known Indonesian economist Faisal Basri, and they carried out an in-depth study and concluded that this mafia benefits from the field of importing fuels, and it seeks in an organized way to keep the import to remain high and increase every year, and works to impede the achievement Or the expansion of oil refineries, and for this, 20 years ago, this goal was not achieved, he said.
And the energy economist at "Gajah Mada" University adds that despite President Jokoy's directing the competent investigation authorities to pursue the oil and gas mafia, this matter has not been resolved, and the construction of refineries has not been completed to continue importing oil.
He continues that the "mafia is pervasive" and takes advantage of weaknesses in the administrative structure and in the way government institutions operate, he said.
Looking for new Arab investments
For his part, the Undersecretary of the Indonesian Ministry of Seas and Investment acknowledges the need for the relevant ministries to follow the progress of the investment and negotiation process in such projects in the future, to overcome all difficulties such as land registration and ownership of land and other commercial and investment licenses and permits, which he said some of them have been delayed in the Aramco project with Pertamina.
Borabaya added that the government will continue to communicate with Arab countries, their companies and their investors, as there are many possible projects and refineries that can be invested in, stressing that the relevant ministries will follow the formal procedures to facilitate investment.
He added that the government does not want to end the Aramco partnership negative perception towards investment in Indonesia, and promised that his country will continue to work to attract investors from the Arab world, and will be present in negotiations between any Arab investor and any Indonesian company.