Indonesia seeks oil output markets outside Singapore
Indonesia seeks oil output markets outside Singapore
SINGAPORE (Reuter): Indonesia is seeking to stabilize its supplies of diesel and jet fuel by diversifying away from Singapore, a source with the state oil firm Pertamina said on Thursday.
Indonesia is a major buyer of these oil products and the diversification would help limit its exposure to sudden price hikes when domestic demand rises, the source said.
"Our affiliates need to have a more permanent understanding with suppliers and not be too dependent on supplies from Singapore," the source told Reuters.
"If we don't have an understanding with major suppliers outside Singapore and our demand increases from time to time, we will have to pay high prices for limited stocks," he said.
Traditionally, Indonesia has sourced its diesel and jet purchases from Singapore-based refineries.
But the source said over the past few months Pertamina's purchasing affiliates, Indoil and Perta Oil Marketing, have been increasingly buying diesel sourced from Saudi Arabian refineries Rabigh and Jubail via traders and major oil firms.
They bought two 110,000-barrel cargoes of jet fuel each in February and March from the Kertih refinery in Trengganu on the Malaysian east coast through Malaysia's state oil trading arm Petco, he said.
Indonesia's needs for April have almost been covered by purchasing 1.7 million barrels of diesel and 900,000 barrels of jet fuel, he said.
Although Indonesia has traditionally bought from Singapore, it has also had an informal agreement to buy 80,000 tonnes a month of diesel from Kuwait Petroleum Corp (KPC), to try to ensure stable supplies.
The affiliates find it more economical to buy cargoes from the Middle East, even if freight costs are factored in, compared with buying from Singapore.
But Singapore traders said profit margins on Middle East cargoes might not always work because prices there were volatile and high freight costs could outstrip any price advantage. Singapore would remain an important supply base for Indonesia, they said.
Discreet buyer
Traders said Indonesia has been a discreet buyer over the past few months and little was known about its purchases.
The Pertamina source said by diversifying sources, it sought to calm the markets and avoid prices from escalating when it is known that Indonesia is out to buy.
He said Indonesia's buying strategy has caused prices to rise strongly in the past. Its monthly demand could only be determined two to four weeks in advance but buyers like India, Taiwan and Sri Lanka tend to issue tenders one or two months in advance.
That left limited supplies by the time Indonesia emerged to buy and so forces prices higher, he said. And the price hike is exacerbated when Indonesian demand rises.
In October last year, when a fire damaged several storage tanks at the country's Cilacap refinery, Indonesia was forced to buy nearly four million barrels of diesel and more than one million barrels of jet-kerosene fuel in both November and December.
The fire contributed to rally in diesel prices to a five-year high of US$28.35 a barrel by February 23 and $33.85 for jet fuel by Jan. 9.
The source said, it is even more important now for Indonesia to seek reliable suppliers away from Singapore as its oil products imports would rise in fiscal 1996/1997 (April/March).
In February, Pertamina's president-director Faisal Abda'oe said, Indonesia would import 34.4 million barrels of diesel, nine million barrels more than in 1995/1996. Jet-kerosene fuel imports would rise to 16.8 million from 14.4 million barrels.