Pertamina fixes cash mess, guarantees fuel supply

Pertamina fixes cash mess, guarantees fuel supply

The Jakarta Post, Jakarta

State oil and gas company PT Pertamina promised that there would
be no disruptions in the domestic fuel supply, saying it had
resolved its financial problems after the government agreed to
pay a fuel subsidy based on the actual price of oil.

Pertamina president director Ariffi Nawawi said on Monday the
government would pay up to Rp 46 trillion (US$4.96 billion) in
fuel subsidies this year, compared to Rp 14.5 trillion originally
allocated in the 2004 state budget.

The higher subsidies are a consequence of the current surge in
international oil prices to about $40 per barrel. The state
budget assumes an average oil price of $22 per barrel.

"The government will reimburse us for the disparity in the oil
subsidy from January to April at the price of $32 per barrel,
hopefully in June. The government has also agreed on a new
subsidy mechanism," Ariffi said.

The new mechanism stipulates that the government will pay 95
percent of the subsidy if the price of crude oil is $33 or more
per barrel, and pay 90 percent of the subsidy if the price is
under $33 a barrel. The remainder will be paid after an audit by
the Supreme Audit Agency.

Previously, the government paid only 70 percent of the
subsidy.

"The reimbursement of the money that we paid to cover the
disparity between the oil price and the subsidy, plus Rp 2.7
trillion left over from last year's subsidy, will hopefully
restore our financial soundness," he said.

Ariffi also urged the government to double its fuel management
and distribution fee -- currently 20 US cents per barrel -- and
proposed a marketing fee for crude oil and liquid natural gas
(LNG) to keep the company's cash flow secure until the end of the
year.

Pertamina imports 30 percent of the crude oil used for its
refineries. It imports 150,000 barrels of crude oil and 300,000
barrel of fuel daily.

Pertamina has been having financial difficulties lately as it
has attempted to cover the gap between the assumed oil price of
$22 a barrel stated in the 2004 state budget, and the real oil
price of about $40 a barrel.

Separately, Minister of Finance Boediono said on Monday the
2004 state budget could increase by between Rp 1.6 trillion and
Rp 1.9 trillion because the fuel subsidy was projected to triple
to Rp 46 trillion.

In the 2004 budget, the government has targeted a deficit of
Rp 24.4 trillion, or 1.2 percent of gross domestic product.

Higher-than-expected oil prices have had a mixed effect on the
country, which is both an oil exporter and importer.

While it can expect windfall profits from exporting oil, it
will also have to spend more money on subsidies for imported
fuel.

The central government is responsible for covering the cost of
fuel subsidies, but revenue from oil exports must be shared by
the central government with oil and gas-producing provinces.