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.