Pertamina buys oil with international L\/C<\/p>\n
TOKYO (Reuters): Indonesian state-owned oil firm Pertamina has
\nmade one of its first imports of crude oil supported by a letter
\nof credit (L\/C) from an international bank, oil trade sources
\nsaid yesterday.<\/p>\n
The break through comes after several deals fell through
\nbecause crude and oil product sellers were not willing to accept
\nL\/Cs from domestic Indonesian banks.<\/p>\n
Bankers and oil traders said the deal represented a small step
\nby Indonesia in re-establishing normal international trade flows
\nafter the financial and political upheaval of the past year.<\/p>\n
\"The problem is not one cargo. The problem is much broader
\nthan that. The problem is to re-establish a regular trade flow,\"
\nsaid one banker.<\/p>\n
\"This could be the start,\" he said.<\/p>\n
Oil traders said British Petroleum Co Plc sold 600,000 barrels
\nof Malaysian Tapis crude oil to Pertamina.<\/p>\n
The deal included a letter of credit in favor of BP issued by
\nan international bank, the trade sources said.<\/p>\n
Companies worldwide have treated trade with Indonesia with
\nextreme caution because of the 85 percent fall in the rupiah and
\nthe recent political upheaval.<\/p>\n
A letter of credit issued by an international bank would be
\nperceived as largely shielding the seller from Indonesian
\nfinancing risk.<\/p>\n
Indonesia is Asia's only member of the Organization of
\nPetroleum Exporting Countries (OPEC).<\/p>\n
It is a net exporter of oil, but imports some types of crude
\nto suit refinery needs and some oil products to fill domestic
\nsupply gaps.<\/p>\n
Before the resignation of President Soeharto in May, Pertamina
\nimported oil through two affiliates. But now it has effectively
\nsevered those contracts because the two affiliates had links with
\nSoeharto.<\/p>\n
That has left Pertamina to trade directly with the
\ninternational market for the first time.<\/p>\n
Traders said the BP deal is one of the first achieved by
\nPertamina using an international L\/C.<\/p>\n
Pertamina has purchased 1.5 million barrels of Malaysian crude
\noil for July lifting from Malaysian state-owned oil firm
\nPetronas.<\/p>\n
But the deal was on open credit so that a traditional
\ncommercial L\/C was not needed.<\/p>\n
It bought its first gas oil cargo in direct trading from a
\nMiddle East national oil company. The sellers was happy with the
\nL\/C involved, although it was not clear if the L\/C was issued by
\nIndonesian banks or international ones.<\/p>\n
However, Australia's The Broken Hill Pty Ltd pulled out of a
\ndeal to sell Kutubu crude to Pertamina because it was not happy
\nwith the L\/C arrangements.<\/p>\n
Mobil Corp canceled a deal to sell Nigerian Qua Iboe to
\nPertamina, but sold 600,000 barrels of Kutubu, accepting L\/Cs
\nfrom domestic banks.<\/p>\n
Sellers are now likely to scrutinize the details of the BP
\ndeal, once they emerge, to determine if other imports can be
\nachieved.<\/p>\n
Bankers said Indonesia has effectively stopped trading since
\nthe economy collapsed and President Soeharto resigned.<\/p>\n
The government has been fully involved in securing a deal with
\nthe International Monetary Fund (IMF) but will increasingly look
\nto build mechanisms, such as trade finance, to secure the short
\nterm imports and exports of the country.<\/p>\n
\"It's a question of starting up something which has completely
\nstopped. It is essential for Indonesia to restart the financing
\nof trade, which has disappeared completely,\" one banker said.<\/p>",
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"sponsor": "Okusi Associates",
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