The future of the Cilacap refinery upgrade project remains uncertain as state-owned energy firm Pertamina and Saudi Aramco have yet to seal a joint venture agreement even after the heads of agreement (HoA) signing a year ago.

Pertamina refineries director Rachmad Hardadi said the two companies had decided to extend the deadline to seal a joint venture agreement to the end of the year, in a bid to iron out several negotiation kinks that the two companies were dealing with.

According to Rachmad, the two companies had yet to agree on one out of four clauses in the joint venture agreement. He declined to disclose the details.

“We hope that by extending the HoA, we can agree on a joint venture by Dec. 31,” he said, adding that Saudi Aramco’s share of the US$5.5 billion project would remain at 45 percent.

Previously, Pertamina’s VP for Strategic Planning, Business Development and Operation Risk Achmad Fathoni said one of the reasons for the delay was due to the composition of the basic engineering design (BED), which took much longer to complete than predicted.

Cilacap refinery is one of four refineries that will receive a face lift under Pertamina’s plan to increase the production capacities of existing refineries. Pertamina also plans to build several new refineries, including one in Bontang, East Kalimantan, and another in Tuban, East Java.

With the upgrade, Cilacap refinery is expected to be operational in 2022 with an increased production capacity of 370,000 barrels of oil per day (bopd) from 340,000 bopd.

Saudi Aramco has also previously shown interest in upgrading the Dumai and Balongan refineries, with an upgrade cost of around $5 billion each. However, no concrete steps have been taken by the two parties as follow-up, even though Pertamina expects to complete the upgrades by 2023. Saudi Aramco did not respond to The Jakarta Post’s questions on the matter.

The negotiation hiccups were seen after the signing of a joint venture agreement for the Tuban refinery construction with Russia’s Rosneft Oil Company in October, only five months after the two parties first signed an HoA.

ReforMiner Institute researcher Komaidi Notonegoro said such delays were normal in public-private partnerships and recommended Pertamina to increase the number of direct appointments, instead of open tender, to speed up the process.

“You will spend less time trying to look for a partner to develop the project, and have more time in the construction so you can reach the target on time,” he said.

Pertamina’s refinery upgrades and constructions are expected to increase production capacity to 2.3 million bopd by 2025 from 1 million bopd in 2015.

The production capacity will reach 2.6 million bopd by 2030, according to the plan. At present, the country’s refineries are only capable of producing around 830,000 bopd, a little over half of the current refined fuel demand, due to age.

According to Pertamina’s calculations, the national demand will also rise to 1.8 million bopd by 2030. The same data show that there will only be a small deficit of 231,000 bopd that year — comprising only of gasoline — if the upgrades and construction finish on time.

However, experts have predicted that Indonesia’s refined fuel demand could reach up to 2.28 million by 2025, resulting in continued reliance on refined fuel imports.

The Energy and Mineral Resources Ministry recently issued a ministerial regulation that allows private companies to construct refineries in order to reduce the country’s dependence on imports.

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