Pertamina has been seeking partners to explore and develop its oil and gas fields because the firm needs to increase production to meet domestic demand and does not have the funds to go it alone.
Initially, the two companies plan to jointly invest $175 million, with SK Corp putting in $113.75 million, to build and operate a Group III base oil plant at Dumai Refinery in Indonesia. Group III base oil is developed using an advanced technology which yields higher quality oil that is saturated and pure, with very low volatility and high viscosity index. With over 50% of the global market share, SK Corp leads the commercial market for Group III base oil.
SK Corp will hold a 65% stake in the joint venture and Pertamina the remainder. Under the agreement, SK Corp is in charge of marketing in the global market and PT Pertamina is in charge of marketing in the Indonesian domestic market.
SK Corp and PT Pertamina also signed a MOU states that the two companies will work closely together on a variety of upstream, downstream, trading and other projects.
Construction of the Indonesia-based base oil plant is slated to begin this summer and will be completed in the first half of 2008. When completed, the companies forecast that the facility will produce 7,250 barrels per day. SK Corp said in a release, "This will help meet growing demand all over the world."
"SK Corp will maintain its leadership in the global Group III market with this agreement," says Shin Heon-Cheol, the president & CEO of SK Corp. "Thanks to this joint venture and the new base oil plant, SK Corpn will be strategically well positioned as the AsiaÆs leading Energy Company."
It will also help boost SK Corp's position in Asia - it is currently the fourth largest refiner in Asia. Pertamina, as a state-owned enterprise, is the de facto leader in the industry in Indonesia, Southeast Asia's only member of OPEC.
But Pertamina has not been able to keep up with the nation's demand. On April 20, the company announced it was importing an extra 400,000 barrels of gasoline and 600,000 barrels of diesel fuel this month, due to the shutdown the vacuum unit at its Dumai refiner. It shut down the vacuum unit for regular maintenance, which is expected to last for two weeks.