July 15, 2010 / 11:56 AM / in 9 years

UPDATE 1-Kuwait's KPC to invest $8-9 bln in Indonesia refinery

* Kuwait plans 300,000 bpd refinery on Java island

* Refinery to get crude from Kuwait at discount

* Indonesia mulls tax breaks for new refineries (Updates with details, possible tax incentives)

JAKARTA, July 15 (Reuters) - Kuwait Petroleum Corp will invest $8-9 billion in a new 300,000 barrels per day (bpd) oil refinery on Indonesia’s Java island, Indonesian Industry Minister MS Hidayat said on Thursday.

The move would help cut fuel shipments into Asia’s biggest gasoline and diesel importer, where delapidated refineries do not meet demand in Southeast Asia’s biggest economy and where no new refinery has been built since 1995.

However no timeframe was given for the Kuwaiti project, and previous plans to build new refineries have failed.

Hidayat said Kuwait Petroleum Corp and Indonesia’s state energy firm Pertamina will sign an MOU at the end of this month for a refinery in Balongan in western Java.

“A joint venture will be formed within six months,” he said. “The crude oil will be supplied from KPC at a discount price.”

Indonesia’s state oil firm Pertamina has said previously it planned to build a new refineries in west and east Java in joint ventures with foreign investors, and to boost capacity at its refineries in Balikpapan, Dumai and Balongan.

For a FACTBOX on Indonesia’s refineries see [ID:nJAK488550].

Pertamina has asked the government for tax incentives for new refinery projects to attract investors.

Indonesia’s investment chief Gita Wirjawan said the government will consider giving a tax holiday to refinery investors.

“I have talked with the finance minister and he responded positively about giving tax incentives for new refinery projects,” Wirjawan told reporters on Thursday.

Indonesia has not build new refineries because of the high cost of projects and low margins in a country where fuel is subsidised. (Reporting by Fathiya Darul and Muklis Ali; Editing by Neil Chatterjee)

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