Indonesian energy group Pertamina and Saudi Aramco, the state-owned Saudi Arabian oil company, have signed a heads of agreement for joint ownership, operation and upgrade of the Cilacap refinery in Central Java, Indonesia. The project, which is said to cost an estimated $5.5 billion, forms part of Pertamina’s refinery development master plan (RDMP).

The proposed upgrade will enable the refinery to process more sour crudes, meet Euro IV specifications and produce petrochemicals, notably paraxylene (PX), propylene and polypropylene (PP), as well as lubricant base oils. Pertamina said the expansion to 370,000 barrel-per-day (bpd) will help meet increasing demand for its products.

The deal, which also includes a long-term supply agreement for Arabian crudes to the Cilacap refinery, will pave the way for the next phase of development. The basic engineering design study is expected to start soon and be completed in 2016. Front-end engineering design is expected during 2017 with an engineering, procurement and construction (EPC) contract to be awarded in 2018. The upgrade is scheduled to be completed in 2021.

Saudi Aramco said participation in the RDMP is a major part of its strategy to grow and expand downstream and become the world’s leading integrated energy and chemical company.

In July 2014, Pertamina offered Saudi Aramco and other strategic partners the opportunity to take part in the upgrade and expansion of five refineries: Cilacap; Balongan; Dumai; Plaju; and Balikpapan. Saudi Aramco was selected for three refineries at Cilacap and Balongan in Java, and Dumai in Sumatra.