Pertamina offers discounts for fear of competition

Pertamina offers discounts for fear of competition

Leony Aurora, The Jakarta Post, Jakarta

Just like stores that slash prices for the Islamic Idul Fitri
holiday drawing near, state oil and gas firm PT Pertamina is
offering its own discounts of between 1 percent and 4 percent for
oil-based fuels sold to industry starting November.

The size of the discount will depend on the consumer's monthly
usage, Pertamina's head of fuel division Achmad Faisal said on
Monday.

Industries that use at least 100 kiloliters (kl) per month
will get a 1 percent discount, while those buying more than 3,000
kl per month, such as cement plants, will get a 4 percent price
cut, he said.

"The competition era has started. Hopefully, (the price cut)
will compel industry to remain as Pertamina's customers," said
Faisal.

The government has opened the door for new players to supply
fuel to industry since it gave the nod for Pertamina to apply
market prices -- more than double subsidized prices at the time
-- for fuel sold to the sector starting July, in light of
ballooning subsidies.

Local private company PT Aneka Kimia Raya (AKR) Corporindo has
been supplying fuel to industry in East Java since October,
targeting to import between 200,000 and 250,000 kl per month
within one year of operation. Another company is planning a
similar operation for Medan.

The door to competition will open wider as multi-national
companies like Malaysia's Petronas and Netherlands' Shell start
distributing unsubsidized fuel to regular customers starting late
November.

Faisal also said that prices for most fuel types for industry
rose slightly in November. Kerosene rose by 1.25 percent to Rp
6,480 a liter, while diesel fuel rose by 2.83 percent from Rp
6,000 per liter to Rp 6,170 a liter.

The price for premium gasoline declined from Rp 6,290 per
liter to Rp 5,890 a liter, he added.

"The prices are applicable starting Nov. 1."

The international bunker prices for November are also higher
by some 3 percent on average as compared to the previous month's
prices. A liter of diesel fuel costs 60.30 U.S. cents, diesel oil
58 cents and fuel oil 37.80 cents.

To attract consumers, Pertamina may also offer other services
in the future, said Faisal. The company may start delivering fuel
to the customer's front door instead of having them come and buy
fuel at the depots.

"Pertamina may cover transport and insurance costs," said
Faisal.

Pertamina now imposes prices for industry in accordance to the
Mid Oil Platts Singapore (MOPS) price, plus an additional 15
percent for distribution services and other costs.

Pertamina began applying market prices for oil, gas, mining
and export-oriented industries, as well as entities that use more
than 500 kl of fuel, in July. The following month, it included
more industries, including fishery companies, those located in
bonded zones, independent power producers and entities that use
more than 24 kl of fuel.

With the implementation of Presidential Decree No. 55/2005 on
the new domestic fuel prices, no subsidized fuel quota is set
aside for industry, except for small enterprises and fishermen,
who will receive a monthly quota of eight kiloliters (kl) each.

Fuel prices for industry in November

Type of fuel Oct. price Nov. price Difference

Premium gasoline Rp 6,290 Rp 5,890 -6.35%

Kerosene Rp 6,400 Rp 6,480 1.25%

Diesel fuel Rp 6,000 Rp 6,170 2.83%

Diesel oil Rp 5,780 Rp 5,940 2.77%

Fuel oil Rp 3,810 Rp 3,870 1.83%

Source: Pertamina