Pertamina's Subholding Synergy, PGN and PRPP Sign HOA Gas Supply at Tuban GRR

Jakarta, April 20, 2022 – Oil and Gas Holding Group synergy in accelerating National Strategic Projects (PSN) in the Refinery project, PT PGN Tbk as Gas Subholding and PT Pertamina Rosneft Pengolahan dan Petrokimia (PRPP) signed a Head of Agreement (HOA) cooperation for natural gas supply at Tuban Grass Root Refinery (GRR). With this, PGN is ready to provide supporting infrastructure for gas sales to PRPP, both through Land-Based LNG Terminals and Pipelines & Stations.

The HOA signing was carried out by the CEO of Gas Subholding PT PGN Tbk, M. Haryo Yunianto, President Director of PRPP, Reizaldi Gustino, and Director of Finance & General Support of PRPP, Pavel Vagero, witnessed by President Director of PT Pertamina, Nicke Widyawati and Director of Logistics & Infrastructure of PT Pertamina, Mulyono.

President Director of PT Pertamina, Nicke Widyawati, said that the Tuban GRR project's success will have strategic value for Pertamina and Indonesia. It will be the first integrated refinery and petrochemical in Indonesia.

Tuban GRR will produce petrochemical products which are currently still dominated by imports. Therefore, it will be one of the steps for Indonesia to improve the trade balance by reducing petrochemical imports.

"With us already producing petrochemicals, this becomes Pertamina's business strategy in facing the energy transition in the future," said Nicke, 18/4/2022.

Nicke said that the integrated petrochemical refinery construction requires a large investment. Pertamina seeks to reduce investment through integration. With this integration, several utilities do not need to be built because they optimize what Pertamina Group already has and can reduce CAPEX.

"From the Pertamina Group side, this synergy must be mutually beneficial. We will use the market price as a basis for making decisions and competitiveness. We also hope to increase efficiency. Because at the end, when efficiency occurs, it will increase profitability and be consolidated into the Pertamina Group. It is a step to make the Pertamina Group stronger in the future," said Nicke.

In line with Nicke, Director of Logistics & Infrastructure of PT Pertamina, Mulyono said that the Tuban GRR construction prioritizes efficiency. "In our opinion, this is an extraordinary synergy as well as for efficiency in building a pipeline from Tuban GRR to TPPN of around 3 km. The construction of this pipeline can reduce the cost of building three tanks at the Tuban GRR and two jetties," said Mulyono

"We will follow up as soon as possible in a definitive agreement and mutual support between Subholding in Pertamina to accelerate the completion of the on-track Tuban GRR project, thereby providing benefits for national energy and creating a multiplier effect for the national economy," added M. Haryo Yunianto.

With a gas demand volume of 227 BBTUD in 2027 and 351 BBTUD from 2028 to 2046, PGN is fully committed as an aggregator for natural gas energy fulfillment to the Tuban GRR.

The Tuban GRR is located ±55 Km from the Gresik-Semarang (Gresem) Transmission Pipeline. The Gresem Pipeline is connected to the EJGP Pipeline, the Upstream Pipeline in the East Java area, and the Kalija Pipeline in Central Java. Thus, this can be done by integrating the pipeline infrastructure and LNG to deliver gas to the Tuban refinery.

The gas supply at the Tuban GRR will increase Pertamina Refinery efficiency and the economic value of the Pertamina Group in facing the current global economic and geopolitical challenges.

"Despite the current global situation, which is quite influential on the Pertamina Group, we still ensure a "No Point of Return" to continue realizing the construction of the Tuban GRR refinery, which is projected to operate by the end of 2027," said Reizaldi Gustino.

Reizaldi stated that the signing of the HoA could be a step for the Pertamina Group synergy, which would positively impact CAPEX and OPEX optimization, environmental impacts, and maintaining the reliability of the Tuban GRR Refinery.

PGN and PRPP will manage the integration of the gas supply schedule against the Tuban GRR master schedule project, as well as identify gas fulfillment scenarios with Pertamina's portfolio of LNG supply and most optimal gas pipelines.

The PRPP Refinery has provided land and will build a jetty to dock large ships, including the Incoming LNGC for LNG Supply. Thus, the LNG Supply scenario with the Land-Based LNG Terminal mode is more feasible.

The integrated petrochemical refinery development is also  Pertamina's business risk mitigation to be more sustainable. When the demand for fuel declines, the Pertamina Refinery will produce petrochemicals and can build derivative infrastructure.**