Indonesian crude trade drops as crisis hits

Indonesian crude trade drops as crisis hits

SINGAPORE (Reuters): OPEC member Indonesia has reduced its
exports of crude oil for February for the third month in a row,
reflecting the country's aim of relying more on domestic crude
and limit imports in the face of financial problems, traders said
yesterday.

Since December, the monthly export volumes of crude oil
allocated by Indonesian state oil company Pertamina has fallen
steadily.

Of its three main crudes, Pertamina allocated for export in
February just 7,000 barrels per day (bpd) of Minas, but no Widuri
or Cinta.

This compares with around 50,000 bpd of Minas and more than
20,000 bpd of Widuri and Cinta that were allocated monthly for
most of last year.

Pertamina's attempts in January to sharply cut exports were
met with objections from affiliates and term buyers, forcing the
state oil company to issue more exports.

Pertamina finally allocated 30,000 bpd of Minas and 11,000 bpd
of Widuri and Cinta for January -- still less than average.

But the affiliates and term buyers said they doubted crude
exports would be much higher for February, as Indonesia tries to
push as much domestically produced crude through to its own
refineries and at the same time limit the drain on its foreign
exchange reserves by cutting imports.

But they added that it was difficult to get firm information
about imports into Indonesia, a member of the Organization of the
Petroleum Exporting Countries (OPEC) which produces around 1.4
million bpd.

"Officially, there is no change in imports. But in reality, I
think it is lower," said one affiliate of Pertamina.

Indonesia has been one of countries worst hit by the Asian
crisis. The rupiah has fallen 71 percent since July 1, 1997 to
Friday's current trading level around 8,500.

That means it has to pay more than 240 percent more for any
crude and oil product imports that it did before the crisis began
last July.

Earlier this week, in a move to restore investor confidence,
Indonesian President Soeharto announced a sweeping reform package
that included a cut in fuel subsidies and wide revisions in the
1998/199 budget.

Soeharto also scaled down the country's economic growth to
zero in the fiscal year starting April and projected inflation at
20 percent.

"The Indonesian situation is very worrying. Everyone is
watching it very closely," said a trader with a major oil
company.

"I'm sure that the financial problems will affect their crude
imports," he added.

One senior official at Pertamina said that the state oil
company had not changed its policy on crude oil imports. But with
spot prices of products being so low, its policy was being driven
by the economics of importing products versus crude, he said.

He said as middle distillate prices were at 10-year lows and
that crude had not fallen so fast, it made sense to import middle
distillates.

"Product prices are quite low in Singapore," he said. "It's
cheaper to import products now."

Indonesia, Asia's second largest crude producer, imports
around 200,000 bpd of crude oil currently.

The imports are partly regional light crudes from Australia
and Malaysia, and West African crudes, mainly from western
traders such Vitol, Glencore and French major Elf.

Indonesia also imports Middle East crudes, through term
contracts with producer countries, traders said.

But shipbrokers said that it was difficult to track the number
of ships moving into Indonesia as a large portion is on long-term
charters which are not reflected in shipping fixtures.

So it was almost impossible to tell if the volumes of crude
going into Indonesia has actually declined, they said.

"There has to be some impact (from the financial crisis). We
have seen a fall in Pertamina's buying, but to a limited degree,"
said a western crude trader who sells regularly to Indonesia.

"But I don't know about other term contracts that Pertamina
may not have performed on," he added.

Some traders said that reduced imports into Indonesia may
become more obvious in February, when the effects of the crisis
deepens.

"We hear that Indonesia has bought just two or three 600,000-
barrel cargoes of regional crudes for February. Usually they buy
five cargoes each month," said a trader with a major oil company.

"Indonesia will continue importing. But it won't be at the
rate that they've been doing six or eight months ago," said one
crude oil seller to Indonesia.