Indonesia's Pertamina on Monday said it has signed a preliminary agreement with Kuwait Petroleum International (KPI) to build a new refinery in Indonesia with capacity of 200,000 to 300,000 barrels per day (bpd).   

The move would help reduce fuel shipments into Asia's biggest gasoline and diesel importer. Existing refineries cannot meet demand in Southeast Asia's biggest economy, where no new refinery has been built since 1995.

Indonesian Industry Minister MS Hidayat said last month that Kuwait Petroleum Corp (KPC) will invest around $8-9 billion to build the new refinery. KPI is a wholly owned subsidiary of KPC.

"The (joint) study will propose the construction of a 200,000 bpd to 300,000 bpd capacity new refinery in Balongan complex in West Java," said Mochamad Harun, a Pertamina spokesman. He gave no timeframe for the project.   

Pertamina has said previously it planned to build new refineries in West and East Java in joint ventures with foreign investors, and to boost capacity at its refineries in Balikpapan, Dumai and Balongan.   

Pertamina has asked the government for tax incentives for new refinery projects to attract investors. - Reuters