20/08/2025

BIZ & FINANCE WEDNESDAY | AUG 20, 2025

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Indonesia plans prefab oil refineries for US crude

“The best step to combat rising living costs would be to reverse the weak yen and seek a somewhat stronger yen.” Kono ran unsuccessfully in last year’s race to lead the ruling Liberal Democratic Party (LDP) that was won by incumbent premier Shigeru Ishiba. The LDP’s huge loss in last month’s upper house election has provoked growing calls within the party for Ishiba to step down, and to hold another race to choose a new leader. Kono declined to comment when asked whether he would run again if the LDP were to hold another leadership race. – Reuters BANGKOK: Thailand’s industrial sentiment index fell for a fifth straight month in July, hitting a three-year low due to worries about the impact of US tariffs and the border conflict with Cambodia, the Federation of Thai Industries said yesterday. The survey was conducted before the US set tariffs on Thai imports at 19%, which was in line with regional peers. However, the tariff rates on transshipments via Thailand from third countries remain uncertain. The US is Thailand’s biggest export market and last year accounted for 18.3% of total shipments, worth $55 billion. The FTI said its industrial sentiment index fell to 86.6 in July from 87.7 in June. Other factors weighing on sentiment included flooding in the country’s north and weakening purchasing power, it added. – Reuters Australia’s August consumer mood lifted by interest rate cuts SYDNEY: A measure of Australian consumer sentiment improved sharply in August as the third cut in interest rates this year bolstered the outlook for finances and the economy, a survey showed yesterday. A Westpac-Melbourne Institute survey showed its main index of consumer sentiment climbed 5.7% in July to 98.5, the highest reading since early 2022. The reading under 100 means pessimists still outnumber optimists, though only just. The pick-up came after the Reserve Bank of Australia cut interest rates a quarter point to 3.60% and left the door open to further easing this year. “That looks to have reinforced consumer expectations that mortgage interest rates are headed lower, giving a broad-based boost to sentiment,” said Matthew Hassan, Westpac’s head of Australian macro-forecasting. The improvement was broad based across the survey’s measures of confidence, with the index of the economic outlook for the next year jumping 7.6% while that for five years rose 5.4%. Family finances compared to a year ago bounced 6.2%, and the outlook for the next 12 months picked up by 5.4%. In a promising note for retailers, the index of whether it was a good time to buy a major household item gained 4.2%. The survey’s measure of whether it was a good time to buy a dwelling climbed 10.5% to a four-year high of 97.8, though that remains below the long-run average of 120 due to affordability constraints. – Reuters Thai industrial sentiment falls to three-year low

of the expansion alone. Indonesia has not built a major refinery in 30 years. Pertamina’s existing six refineries have a combined capacity of 1.06 million bpd, meeting around 60% of domestic fuel demand. In 2022, Pertamina completed a first-phase upgrade at the Balongan refinery to increase capacity by 25,000 bpd, but the US$7.4 billion upgrade of the Balikpapan refinery under the Refinery Development Master Plan (RDMP) is yet to be completed. A partnership with Rosneft to build a 300,000-bpd refinery and petrochemical complex in Tuban has faced delays due to sanctions on Russia over its war with Ukraine. “Building the 17 refineries seems quite ambitious considering that RDMP plans are also under way,” said Pankaj Srivastava, senior vice-president at Rystad Energy. Simple refineries can be completed in less than half the time of larger complexes and cost less, providing a “quick fix” and easing Indonesia’s reliance on refined oil imports, but will not help the country achieve its goal to expand its petrochemical capacity, he said. Small refineries, typically with capacities of 50,000 bpd to 150,000 bpd, are generally simpler units without upgrading facilities, limiting economies of scale, said Adi Imsirovic, director at Surrey Clean Energy. Additionally, these projects - with a smaller feedstock requirement and terminal restrictions – will likely require the use of smaller vessels to import crude, raising costs significantly, said Sparta Commodities’ senior analyst June Goh. – Reuters

buy US$15 billion (RM63 billion) worth of US energy products for reduced tariffs on Indonesian goods. “We will import crude oil into Indonesia and that will require refineries that match the characteristics of US crude, so we invest accordingly,” Danantara CEO Rosan Roeslani told reporters at a conference last month, adding that details were still being discussed. Deputy Energy Minister Yuliot Tanjung said there were plans to locate the refineries close to oil production sites. Initial studies for modular infrastructure and oil storage facilities have been conducted in Natuna, Surabaya, North Halmahera and Fakfak, among others. The planned projects were among those proposed to Danantara for funding, Yuliot said. Indonesia’s total oil and gas imports stood at US$36.28 billion in 2024, official data showed. Analysts have expressed caution over the feasibility of the strategy, citing Indonesia’s historical challenges in expanding its refining capacity. Indonesia’s Pertamina has plans to invest US$48 billion to upgrade six refineries and construct a large refining and petrochemical complex to double the state-owned firm’s oil products output to 1.5 million barrels per day (bpd). Pertamina initially partnered with major global companies for the projects, but most of the partnerships were cancelled for various reasons, including disagreement over the value of projects, forcing Pertamina to conduct most

JAKARTA/SINGAPORE: Indonesia plans to build a network of small modular refineries to process US and domestic oil, aiming to reduce petrol imports, but analysts warn the switch in strategy from large-scale refining facilities could prove uneconomical. The prefabricated refinery units, which can be constructed faster and more cheaply than traditional plants, will help Asia’s largest importer of petrol meet domestic demand and its commitment to increase US imports. Indonesia’s focus on small refineries runs counter to the global trend of ever-larger crude processing facilities that maximise economies of scale, analysts say. Reuters reported last month that Indonesian sovereign wealth fund Danantara planned to sign an US$8 billion contract with US engineering firm KBR Inc for 17 modular refineries, citing sources and an official economic ministry presentation. Danantara has not commented directly on the deal and KBR did not respond to Reuters requests for comment. Indonesian officials confirmed the refinery plan, which was agreed as part of Indonesia’s deal with Washington that includes a pledge to o Analysts caution that small modular facilities could prove uneconomical

A view of state owned oil giant Pertamina’s refinery unit IV in Cilacap, Central Java, Indonesia. Pertamina’s existing six refineries have a combined capacity of 1.06 million bpd, meeting around 60% of domestic fuel demand. – REUTERSPIC

Japan must raise rates, get fiscal house in order, says veteran lawmaker

TOKYO: Japan must raise interest rates and get its fiscal house in order to strengthen a weak yen that has pushed up inflation and brought pain to households, veteran ruling party lawmaker Taro Kono ( pic ) told Reuters yesterday. The Bank of Japan (BOJ) ended a massive, decade-long stimulus programme last year and raised short-term rates to 0.5% in January, on the view that Japan was on the cusp of durably hitting its inflation target of 2%. Kono, a former foreign minister who is touted as being among the

export-heavy economy, the weak yen is now the root cause of crippling inflation that is eroding corporate margins and hurting pensioners, Kono said. The government and the BOJ must agree on a new economic framework that replaces so-called “Abenomics”, a mix of massive monetary and fiscal stimulus deployed by former premier Shinzo Abe in 2013 to end deflation, he said. “The BOJ should gradually raise interest rates, while the government should restore fiscal health under a new accord that replaces ‘Abenomics’,” Kono said.

gradually. Asked about market expectations for the BOJ to raise rates again by year-end, Kono said,“I won’t comment on each move. But I feel like (rate hikes) have already come too late.” While consumer inflation has kept above 2% for well over three years, BOJ governor Kazuo Ueda has stressed the need to tread cautiously on further rate hikes, due to an expected hit to the economy from US tariffs. Critics have blamed the slow pace of BOJ rate hikes for keeping the yen weak and pushing up import costs. Once seen as a boon for Japan’s

candidates to become a future prime minister, said it was undesirable for inflation-adjusted real borrowing costs to stay negative for a long time. “I think it’s better to start early,” he said in an interview, replying to a question on how soon the central bank should

resume interest rate hikes. “It’s important to send out a message that Japan will pull out of a situation where real interest rates are negative,” he said, stressing the need for the BOJ to keep raising rates