Oil fuel subsidy to reach Rp 2t, Pertamina says

JAKARTA (JP): The government will spend Rp 2 trillion (US$847 million) subsidizing domestic oil fuels this fiscal year owing to the increase in international crude oil prices, state-owned oil company Pertamina said yesterday.

Company finance director Soegianto said the average crude oil price on the international market reached $19.15 a barrel in the first semester (April-September) of the 1996/1997 fiscal year.

This figure is about three dollars higher than the government's estimate of $16.5 a barrel, the average price used by domestic refineries for crude oil.

He said the higher costs of the oil fuel should be subsidized, since the government decided not to raise the domestic oil fuel prices.

Soe estimated the crude oil price on the international market in the second semester of the current fiscal year would be higher, ranging from $19.5 to $20 a barrel.

The government's subsidy for the domestic sale of fuel oil would reach Rp 2 trillion throughout the current fiscal year.

Indonesia thus far has six refineries -- in Pangkalan Brandan, Dumai and Plaju in Sumatra; Cilacap and Balongan in Java; and Balikpapan in East Kalimantan -- with a total processing capacity of 982,500 barrels per day. All the refineries are owned by Pertamina.

"But the subsidy can be offset by the additional revenues gained by the government from crude oil exports," he said.

According to Soegianto, the government raked in an about Rp 1.4 trillion in additional revenue every time crude oil price on the international market exceeded the government's estimate by $1.

Thus, he said, the government could expect Rp 4.2 trillion in additional revenues from the rise in crude oil price throughout the year.

Soegianto said the increase in crude oil prices would make Pertamina pay higher production cost of oil fuel. This would in turn decrease its net profit from oil sales.

He said the government might not reach the target of Rp 827 billion in net profit from domestic oil sales this fiscal year.

The oil price is expected to continue to rise next year. This explains the government's projection of only Rp 249 billion net profit from domestic oil sales in the fiscal year 1997/1998 beginning in April -- down 70 percent from the current target.

The government projected revenues from oil and gas exports would reach Rp 14.9 trillion in the next fiscal year, up 5.3 percent from the current target, he said.

The government projected oil output at a daily average of 1.52 million barrels, including gas condensate and a crude oil price of $16.5 a barrel. (jsk)