Govt disburses Rp 4 trillion of its fuel subsidy to Pertamina

Leony Aurora, The Jakarta Post/Jakarta

The government has disbursed Rp 4 trillion (US$417 million) as part of its fuel subsidy to state oil and gas firm Pertamina to cover much-needed imports and secure domestic supply, a top executive of the company said.

Pertamina's vice president Mustiko Saleh said on Friday that the fuel subsidy was disbursed earlier in the day.

"We have to make sure that fuel stocks stay above 20 days," he said.

Domestic fuel stocks at present stand at 18 days, while the ideal is to have a stock of 22 days.

Despite the funds from the government, Mustiko said Pertamina was still in need of a loan to finance its activities. He declined to provide details.

The oil firm's finance director Alfred Rohimone said last week that Pertamina was looking for loans amounting to $500 million to import fuel.

Chief commissioner Martiono Hadianto refused to comment on suggestions that the board of commissioners had rejected the loan proposal.

"It's an internal matter between the board of commissioners and the board of directors," he said.

Pertamina needs some $1.1 billion per month to import fuel to secure domestic supply, estimated at about 1.15 million bpd.

The oil firm imports 300,000 barrels per day (bpd) of crude oil to be processed at its refineries, which have a total capacity to process one million barrels of crude oil per day.

To fulfill domestic demand, Pertamina also needs to import fuel amounting to 400,000 bpd.

Pertamina announced in April that it was having difficulty in importing oil as several banks refused to issue a letter of credit (L/C), required to guarantee import payments, as the company owed the banks trillions of rupiah.

After the incident, the government agreed to a new scheme of fuel subsidy disbursement, where it provides only Rp 1.2 trillion each month.

The amount is roughly the difference between what the government owes Pertamina as a fuel subsidy and what the firm owes the state in, among other things, crude and liquefied natural gas sales.

The firm needs to import more fuel in July as Dumai refinery, with a capacity to process 110,000 bpd, will be closed for 21 days for maintenance.

Pertamina's deputy director for processing Dwi Kushartoyo said that after the Dumai turnaround was finished, the company would proceed with the maintenance of a unit at its refinery in Cilacap, Central Java.

The Cilacap 2 unit has the capacity to process 230,000 bpd, he said. "The (Cilacap) turnaround will take place between August and September," he added.