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.