New system hoped to stem oil smuggling

Leony Aurora, The Jakarta Post, Balikpapan

As the crude oil theft in Lawe Lawe unfolds, state oil and gas firm PT Pertamina is set to improve its oil monitoring by installing a real-time online system of automated tank gauges (ATGs).

Balikpapan will accommodate the pilot project for the system, which will involve 23 ATGs in the initial phase, general manager of Pertamina's processing unit V Syahrul Arifin said in Balikpapan, East Kalimantan, on Sunday.

Seven of the meterings will be installed in Lawe Lawe, he said.

"We hope to have these gauges calibrated by the Ministry of Industry and in place within two months," said Syahrul.

Pertamina's head of public and government relations Djauhari Kunsetianto said that even if the agency could not calibrate the gauges, they would be used to compare the records of manual metering -- the standard operation used currently to determine the amounts of crude coming in and out.

Many of the ATGs already installed in Lawe Lawe were not working properly and could not be monitored in the storage facility's control center on Sunday.

At present, Pertamina officials check the gauges every morning at 6 a.m. and report the amounts by phone to Balikpapan. With the new system, officials will be able to check the amounts of crude or products anytime.

"If (the system) works, we will expand it to the other refineries and storages," said Djauhari.

Pertamina expects to spend up to Rp 5 billion (US$500,000) to lease the system for five years.

All eyes are on Pertamina as a major ring of oil theft was discovered two weeks ago.

In Lawe Lawe, the storage facilities are connected to tankers by pipelines, which run seven kilometers onshore and 10 kilometers underwater.

Tankers have to use floating hoses to connect with a single point mooring, which channels oil through subsea hoses to the pipelines.

Although the modus operandi of the suspects remains hazy, the company believes that the proprietors tampered with the oil, keeping the shortfall no higher than the tolerable difference of 0.5 percent -- for evaporation and different metering methods used -- between the amount of oil stated by sellers and that entering the storages.

The proprietors may have recorded slightly-less than the actual amount on paper, but still kept the shortfall at below 0.5 percent. After a period, the oil was stolen during the flushing process, which is conducted with light crude after the loading of heavy crude, by pumping the light crude into small vessels instead of letting it pass back to the storage.

The suspects in the Lawe Lawe smuggling admitted to having conducted the illegal activity five times, stealing between 12,000 barrels and 13,000 barrels at a time.

Syahrul said that Pertamina was considering lowering the tolerable loss to 0.3 percent.

"We are studying the proper tolerable loss based on our statistics," he said, arguing that the figure was determined in the 1980s.

"Gauging systems were different back then," he added.

The implementation of such a policy, however, may prove to be difficult as it will require the consent of sellers, as well as of international oil organizations.