China, Iran, Indonesia to Build Joint Refinery

China, Iran, Indonesia to Build Joint Refinery China, Iran, Indonesia to Build Joint Refinery

A trilateral agreement was concluded between Iran, China and Indonesia to build an ultra-heavy oil refinery in Java island off Indonesia with a capacity of 150,000 barrels a day, head of Iran's oil product exporters' associations told Mehr on Wednesday .

On the crucial issue of supplying feedstock to the unit, Hassan Khosrojerdi said, "negotiations are underway directly with the oil minister so that not only can Iran provide the refinery with feedstock, but also meet a part of the financial resources."

Underlining the fact that 85% of the project is to be financed by Chinese firms, the official said in addition to the refinery, construction of five gas condensate plants are also on the agenda. Nevertheless, due to the construction of new refineries in Iran, including the two major ones, Persian Gulf and Siraf refineries, Tehran turned down the request for a long-term feedstock provision.

According to the official construction of the six refineries is projected to cost $3.5 billion.

Indonesia is willing to sign long-term contracts to import crude from Iran as soon as sanctions are lifted, Business Times quoted Sudirman, the minister of energy and mineral resources, as saying last week.

Referring to the import of 900,000 bpd, Indonesia's coordinating minister for economic affairs, Sofyan Djalil announced that his country will increase its refining capacity up to 300,000 bpd.

Reports in May had said Iran had agreed to build an oil refinery with a capacity of 150,000 barrels a day in Indonesia. Iran, Indonesia, and Malaysia will jointly cooperate in the construction of the $3 billion refinery. Jakarta and Tehran will each undertake 40 percent of the project, while the Malaysian share will be 20 percent.

The oil refinery project has been pending since 2006 due to Indonesia’s concerns in the follow up of due to the western sanctions against Iran's nuclear program.

Iran and Indonesia recently reached an agreement whereby Iranian companies would build 48 small-scale hydropower plants in Indonesia.

Tehran is under punitive economic sanctions because of its nuclear program. After talks in Lausanne, Switzerland, Iran and the P5+1 (Britain, China, France, Russia, the US plus Germany) reached a framework agreement on April 2 that calls for lifting all trade sanctions against Iran. The details of the agreement are to be finalized by a June 30 deadline.