Pertamina proposes higher fuel management fees

Pertamina proposes higher fuel management fees

The Jakarta Post, Jakarta

State oil and gas company Pertamina has proposed that the
government double its fuel processing and distribution fees to
ease the company's financial woes.

Pertamina president Ariffi Nawawi said the request for
additional fees was reasonable given the fact that the company
had to shoulder "opportunity losses" by maintaining a 23-day
national oil fuel stock.

"We did not make the proposal seeking a greater profit. We are
just asking for an amount that is enough to cover all our (fuel
processing and distribution) cost burdens," Ariffi Nawawi said
after a hearing with House of Representatives Commission VIII for
mining and energy on Wednesday

Ariffi said the company has submitted the proposal to the
Ministry of Energy and Mineral Resources.

At present, Pertamina charges the government 40 US cents per
barrel in total fees, which breaks down to 20 cents for crude
processing and 20 cents for fuel distribution. Under the
proposal, the firm wants the fee to be raised to 80 cents per
barrel; 40 cents for processing and 40 cents for distribution.

Under the current system, Pertamina processes crude oil owned
by the government and distributes the oil to the public at prices
determined by the government. The government currently takes 85
percent of the output of the nation's oil fields, while
contractors take the remaining 15 percent.

Pertamina now processes about 1 million barrels of crude oil
per day at seven refineries, including 700,000 barrels of
government oil and 300,000 barrels of imported oil.

The company has run into cash flow problems resulting from the
recent surge in oil prices. The government has provided funds for
Pertamina to import crude oil at the state budget's price
assumption of $22 per barrel, which is far below the current
price of oil of about $40 per barrel.

Pertamina has also lost substantial revenue from supervising
production-sharing contractors because it has lost its monopoly
rights over the oil and gas industry.

Darmin Nasution, director general of financial institutions at
the Ministry of Finance, said his office would approve
Pertamina's proposal once the Ministry of Energy and Mineral
Resources submitted an official request.

He said, however, the proposal would first need to be
discussed with the budget committee because it would increase the
fuel subsidy and cut the government's revenue for oil and gas.