Indonesian state-owned oil and gas company Pertamina has signed a memorandum of understanding (MoU) with construction firm PT Nindya Karya and DH Global Holdings of South Korea to co-operate on a US$1.5 billion refinery upgrade development in Dumai, a city located in Indonesia's Riau province, according to published reports.

The project is part of Pertamina’s refinery development master plan (RDMP) and Grass Root Refinery programme aimed at improving the capacity and competitiveness of refineries in Indonesia.

The RDMP involves the revitalization of five existing refineries in Cilacapin in Central Java province, Balongan in West Java, Dumai in Riau, Balikpapan in East Kalimantan and Plaju in South Sumatra.

The Grass Root Refinery programme details the company’s plans to construct two new production facilities in Tuban in East Java and Bontang in East Kalimantan.

The MoU was signed on 20 May by Pertamina megaprojects director Ignatius Tallulembang, Nindya Karya president-director Haedar Karim, and DH Global Holdings chairman Jung Sam Seung.

“This US$1.5 billion project will increase the domestic oil and fuel production capacity, which will consequently reduce our dependence on oil imports and trade deficits in the future,” says Bahlil Lahadalia, chairman of Indonesia's Investment Co-ordinating Board (BKPM).

The upgraded refineries' capacity will increase 38.2% to 1.21 billion barrels per day (bpd) and the new refineries will add a combined capacity of 600,000 bpd.

Work on the Dumai refinery upgrade project has been prioritized.