Pertamina strikes deals to import crude oil, fuel

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)