Pertamina says fuel problems resolved

Pertamina says fuel problems resolved

Fitri Wulandari, Jakarta

State oil and gas firm PT Pertamina said the fuel supply
problems that have been affecting some areas of the country were
due to technical problems rather than low fuel stocks.

The company gave assurances that national fuel stocks were
sufficient and that the supply problems had been resolved.

"There is no fuel shortage at present. The latest problem,
which occurred two weeks ago and affected a few areas, is due to
technical problems," Hanung Budya Yukyanta, the company's
spokesman, told The Jakarta Post on Monday.

Pertamina was commenting on earlier press reports suggesting
that there had been fuel shortages in some parts of the country,
something that would not only affect economic activities but
could also trigger social unrest, particularly during the current
election period. The reports said that the shortages had occurred
because of a drop in the national fuel stocks.

Hanung acknowledged there had been a shortage of automotive
diesel fuel in Jambi province two weeks ago which had been caused
by transportation problems and increasing consumption.

"The barges that transport the fuel to Jambi were carrying
less fuel because the river was shallow during the dry season.
Additionally, people were stocking up on fuel for fear of
shortages," Hanung said.

However, Hanung said that supplies to Jambi province were now
back to normal.

Supply disruptions also occurred in Alor, East Nusa Tenggara,
with Pertamina saying that once again transportation problems
were to blame.

"But we have dispatched ships to transport more fuel. Now,
fuel stocks in Alor are safe for 10 days," Hanung added.

Pertamina acknowledged that national fuel stocks had recently
dropped to a low of 19 days but now were back to normal at 22
days.

"They are now climbing back to a safe level of 24 days,"
Hanung said.

The drop in the national fuel stocks, Hanung explained, was
because the company did not have sufficient cash on hand to
import crude and fuel products.

Hanung said the company needed around US$900 million in cash
each month to buy crude and oil-based fuel products. Although
Indonesia is also an oil producing country, it still imports some
of its fuel needs.

Pertamina's cash flow problem was partly due to the failure of
the government to reimburse monthly fuel spending undertaken by
the company, Hanung said.

The government normally makes the reimbursement in the
following year after the Supreme Audit Agency audits Pertamina
spending.

But as oil prices have recently surged to record levels of
around US$40 per barrel, the company has had to spend much more
money (the current 2004 state budget assumes an international oil
price of $22 per barrel) for importing fuel products, while
selling it here at a lower price in line with the government's
subsidy policy. This has left the company's cash flow at a
critical level of below Rp 2 trillion ($217.39 million).

Pertamina will retains the right to provide crude and oil-
based fuel products for nationwide consumption until 2005 when a
free market will be applied in the downstream oil and gas sector.

"We have asked the Ministry of Finance to immediately
reimburse the fuel subsidy funds," he said.

The company and the government had reached an agreement that
the government must reimburse the fuel subsidy funds to Pertamina
on a monthly basis.

"If Pertamina can fix the cash flow problem than we can meet
our commitments to our suppliers abroad," Hanung said.