S'pore guarantee vital for Pertamina<\/p>\n
KUALA LUMPUR (Reuters): A US$5 billion Singapore government
\ntrade financing guarantee could be used to underwrite the maiden
\ndirect oil imports of Indonesia's energy monopoly Pertamina,
\nindustry sources said on Tuesday.<\/p>\n
Oil officials said they hoped the trade finance could provide
\na bridge between July, when Pertamina plans to trade directly
\nwith the international market, until the time that the company
\nhas set up all the commercial links it needs to become a fully
\nfledged trading entity.<\/p>\n
Pertamina had given close to exclusive marketing rights to two
\nPresident Soeharto-linked companies -- Perta and Permindo --
\nuntil the Soeharto's resignation earlier this month and so had
\nlittle, if any, trading experience.<\/p>\n
Pertamina is to review its contracts with the two companies to
\nsee if they are still needed.<\/p>\n
Delegates at an oil conference in Kuala Lumpur said that they
\nwere worried trading with Pertamina might represent a risk
\nbecause of its lack of commercial ties, particularly with
\ninternational banks to raise letters of credit (LCs).<\/p>\n
\"In the past, the affiliates handled this. Now Pertamina has
\nto use scarce hard currency to pay for the oil imports,\" a senior
\nofficial of a Singapore-based refinery said.<\/p>\n
The source said oil companies have made representations to the
\nSingapore government about using the trade guarantees to supply
\nIndonesia with oil.<\/p>\n
Singapore has pledged to guarantee imports from and through
\nSingapore up to a value of US$5 billion as part of international
\nhelp to support the Indonesian economy.<\/p>\n
A spokeswoman for Singapore's Trade Development Board could
\nnot immediately respond to a Reuter query on the issue.<\/p>\n
Sources estimate that about 10 percent of Singapore oil
\nexports, which amounted to Singapore $1.3 billion (US$770
\nmillion) in April, are destined for Indonesia.<\/p>\n
But they were not sure how the plan, first mooted early this
\nyear, would be implemented, especially with the change in the
\nIndonesian leadership.<\/p>\n
\"I'm not sure how it would be implemented. It's very
\ncomplicated,\" the senior refinery official said.<\/p>\n
Singapore Deputy Prime Minister Lee Hsien Loong said on Monday
\nthe government would go ahead with the trade financing despite
\nrecent upheaval in Indonesia.<\/p>\n
The oil sources said it was vital for Pertamina to move
\nquickly to set up a sound financial base for trading, because
\nmost potential oil trading partners were wary of the financial
\nrisks involved.<\/p>\n
\"We would not sell to them unless there is an LC issued by an
\ninternational bank. The risk is just too great,\" one supplier
\nsaid.<\/p>\n
Pertamina's crude and oil product import bill on average costs
\nabout $5 million a day, sources estimated.<\/p>\n
\"Initially there will be a lot of hand holding. I think now is
\na good time for oil companies to set up in Indonesia and take
\nadvantage of the opening,\" one trader said.<\/p>\n
Traders said despite Pertamina's woes, the oil company was
\nunder pressure to secure its first cargo for delivery in July
\ndirectly, in order to be seen implementing reform of past
\npractices.<\/p>\n
\"Politically, I think Pertamina has no choice but to import
\nthe cargoes directly in July. It would probably be done through
\nan oil major,\" one regular supplier said.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/spore-guarantee-vital-for-pertamina-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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