Pertamina strikes deals to import crude oil, fuel

JAKARTA (JP): State oil and gas company Pertamina announced yesterday that it has struck deals to import crude oil and fuel, ending speculation that it was unable to do so because of a poor international network and cash flow problems.

"I can confirm that deals have already been signed, but I don't have the figures," company processing director Samto Utomo told reporters.

It is the first fuel and crude oil import deal to be made by Pertamina since the company ended its contracts with Perta Oil Marketing Ltd and Permindo Oil Trading Co. Ltd, which had monopolized the lucrative imports for decades.

Perta is 30 percent owned by Pertamina, 20 percent by Pertamina's pension fund, 25 percent by Soeharto's youngest son Hutomo Mandala Putra, and 25 percent by the Nusamba group controlled by Soeharto's longtime crony Mohammad "Bob" Hasan.

Permindo is 35 percent owned by Pertamina and 75 percent by the Bimantara group, which is controlled by Soeharto's son Bambang Trihatmodjo.

The importing companies each received a commission of between 10 and 30 US cents per barrel.

Although Indonesia is a net oil exporter, it has to import between 15 and 20 percent of its annual fuel consumption of 327 million barrels because of the limited capacity of Pertamina's refineries. It also imports 70 million barrels of heavy crude oil to feed its refineries. Indonesia produces and exports lighter grades of crude oil.

The government recently scrapped the monopoly held by the two companies and ordered Pertamina to set up and prepare its own trading division to begin directly importing fuel and crude oil from next month.

Traders in Singapore expressed doubts that Pertamina would be able to import by its own fuel and crude oil because it lacked a good trading network and was facing cash flow problems.

Pertamina president Soegianto recently admitted the company was facing cash flow problems because the government had delayed reimbursing it for two months of fuel subsidies which it had paid in advance.

The problem was further aggravated by foreign countries' refusal to accept Indonesian letters of credits (L/Cs), he explained.

However, Soegianto said yesterday that the problem surrounding letters of credit had been resolved when Bank Indonesia stepped into the fray and said it would issue letters of credit for the company.

Samto said the lack of a trading network did not pose an undue difficulty for the company.

"We haven't faced any undue difficulties. In fact, we have received many offers from (oil and fuel) producers and traders," Samto said.

He said Pertamina would buy crude oil from producers which offered the lowest price.

Samto explained that Pertamina currently needs to import 200,000 barrels per day (bpd) of crude oil, including 100,000 bpd of heavy crude oil from the Middle East, and 100,000 bpd of crude oil of other types for its refineries.

Soegianto said Perta and Permindo could continue to import fuel and crude oil, but added that Pertamina would only buy from them if they set their prices lower than Pertamina's trading division.

Soegianto said that a decision on whether to sell Pertamina's stake in both companies had not yet been taken. (jsk)