Pertamina seeks government guarantee for fuel imports

Fitri Wulandari, Jakarta

State oil and gas firm PT Pertamina is requesting a government guarantee to facilitate crucial fuel import plans as the company faces cash flow problems.

Pertamina's finance director Alfred Rohimone said a government guarantee would be needed in obtaining loans from banks to finance fuel imports if the government fails to reimburse the company for its share of the fuel subsidy.

"We have asked for a letter of guarantee from the government so that we can approach a bank," Alfred told reporters on Tuesday.

Without sufficient cash in hand, Alfred said, it would be difficult to realize the fuel import plan.

Fuel imports are essential to avoid a shortage, a problem that has occurred in several parts of the country and could create serious social unrest and economic damage if not immediately resolved.

On Monday, Pertamina said it would import between 10,000 kiloliters (kl) and 20,000 kl of premium gasoline and automotive diesel oil to boost national fuel stockpiles to a safe level of 24 days of demand.

National fuel stockpiles stand at a total of 20.4 days of demand. Premium gasoline and automotive diesel oil have the lowest inventories of 14 days and 18.2 days respectively. Other types of fuel do not need additional imports as stockpiles are at a safe level.

The drop in fuel stockpiles has been partly related to Pertamina's cash flow problem.

Until November 2005, Pertamina retains its monopoly in the provision and distribution of oil-based fuel products, including importing 20 percent of domestic needs for oil-based products.

The delay in the reimbursement of the fuel subsidy was aggravated by soaring international oil prices, limiting the company's ability to import fuel products.

The Ministry of Finance has recently agreed to reimburse up to 95 percent of fuel subsidy spending every month.

But Alfred said that the government had yet to reimburse some Rp 12.9 trillion (US$1.43 billion) in subsidy spending undertaken by Pertamina from January to June this year.

"The government was supposed to reimburse the fuel spending by July 10, but we haven't received it," Alfred said.

Fuel inventories will further drop if Pertamina fails to realize the import plan and may affect fuel provisions to regions outside Java, Alfred said.

Director General of Financial Institutions at the Ministry of Finance Darmin Nasution said on Monday that the government was still discussing the matter with the company to find the best solution.

Darmin said Pertamina still had debt to the government that amounted to more than the monthly fuel subsidy spending.

Alfred argued that if the government reimbursed the fuel spending accordingly, the company would have more money to repay its debt.

"The fuel subsidy must be reimbursed every month to secure Pertamina's cash flow. Then we would have enough money at the end of the month to pay our debt," Alfred said.

As of June this year, Pertamina's debt to the government stands at Rp 15 trillion. The company has yet to pay Rp 9.1 trillion of debt in 2003 to the government.