Pertamina to alter purchasing policy

Pertamina to alter purchasing policy

SINGAPORE (Reuter): Indonesian state oil company Pertamina
will resort to spot purchases rather than contracts to meet
increased demand for refined oil products next fiscal year, a
company official said yesterday.

"It's difficult to have long term contracts for oil products
purchases and we usually buy from the spot market," the official
of the national oil company said in a telephone interview from
Jakarta.

"Even if we manage to tie up a contract with a refinery, the
price would still be market-related and would have to be reviewed
for every shipment," he added.

Pertamina president-director Faisal Abda'oe told a
parliamentary hearing on Tuesday that Indonesia would have to
import 34.4 million barrels of diesel in fiscal 1996/1997
(April/March), nine million barrels more than in 1995/1996.

This works out to a monthly average of 2.8 million barrels for
the new fiscal year, compared with 2.1 million barrels currently.

Abda'oe also said jet-kerosene fuel imports would rise to 16.8
million barrels, or 1.4 million barrels a month, from 14.4
million barrels, or 1.2 million barrels a month.

Pertamina, through its affiliates, only has one term purchase
deal, with Kuwait Petroleum Corp (KPC) for 80,000 tons of diesel
a month. It also buys kerosene under this deal.

The senior official noted Singapore refineries were able to
export about 800,000 barrels per day (bpd) of oil products to the
region.

But he said the region's huge demand absorbed most supplies
from Singapore and extra cargoes had to be shipped in from the
Middle East, the Mediterranean, Europe and the United States.

Such a volatile market meant it was better to buy from the
spot market where the buyer could choose sellers for every cargo,
rather than be committed to a term contract and still be subject
to regular price reviews, he said.

"It is also difficult to have a long term contract with any
refinery because everybody wants to diversify their buyers," he
said.

The official attributed the rise in diesel demand to greater
numbers of diesel-fueled vehicles. Industries using diesel
generators also consume larger amounts of the product.

Traders said Indonesia's increasing thirst for diesel and
kerosene will help absorb some of the extra supplies in the
region when new refineries start up over the next two years.

Thailand will produce an additional 275,000 barrels per day
(bpd) of oil product and South Korea 620,000 bpd more by 1997.

"At the last APPEC (Asia Pacific Petroleum Conference) in
September everybody was bearish," a trader with a major oil firm
said. "This new demand will offset the bearishness linked to the
new refining capacities."

Abda'oe also said Indonesian crude oil imports would rise to
62.4 million barrels in 1996/1997 from 59.0 million barrels.

He said whether or not Pertamina struck a new term deal for
extra crude imports would depend on the "market situation" as
Jakarta sought more middle-distillate rich crudes like Malaysia's
Dulang grade and sold more of its own crudes which are low in
middle-distillate yield.

But crude traders said regional light sweet crude supplies
would continue to be tight and Indonesia would find it hard to
secure this grade. It would have to look outside the region,
possibly to West Africa, they said.

Analysts have predicted that Indonesia, OPEC's only Asian
member, will become a net oil importer sometime around the turn
of the century as booming demand outpaces domestic production.