Pertamina to boost unleaded gas supply
Fitri Wulandari, Jakarta
State oil and gas firm Pertamina will be able to supply unleaded gasoline to the entire country in 2006 as part of the implementation of the government's Blue Sky project to scrap leaded gasoline, a company official said over the weekend.
The policy itself is a part of the company's strategy to face up to tighter competition in the domestic market after it loses its monopoly on the production and distribution of oil-based fuel products starting next year, said the official.
Pertamina spokesman Hanung Budya Yukyanta said the company was confident it would be able to meet the 2006 deadline as its current project to increase the production of high octane mogas component (HOMC) was proceeding as scheduled.
"Unleaded gasoline will be Pertamina's main product for competing with new players in taking shares of the cake in the country's oil-based fuel market," Hanung said.
The Blue Sky project is a government program to phase out leaded gasoline so as to improve air quality. Leaded gasoline is responsible for serious pollution problems in Indonesia.
HOMC is used to replace the lead that was previously added to gasoline to increase its octane level to boost engine performance.
In order to boost HOMC output, Pertamina is upgrading the Balongan refinery in Indramayu, West Java, by constructing a unit to produce HOMC. When the unit is completed in 2005, it will increase Balongan's production by 52,000 barrels per day from the current daily output of 128,000 bpd.
The Balongan project is estimated to cost US$200 million, of which 70 percent will be financed by external funding and 30 percent from Pertamina's own equity. Japan's Mitsui Corp. has been nominated as the lead arranger and product off-taker for the Balongan project, which is expected to be completed next year.
Pertamina has also entered into a product swap deal with aromatic company PT Trans Pacific Petrochemical Indotama (TPPI) in Tuban, East Java, which will begin production in 2006.
Hanung said that under the deal, Pertamina would supply a certain amount of Low Sulphur Waxy Residue (LSWR) fuel oil for TPPI. In return, the company would supply HOMC, kerosene and automotive diesel fuel for Pertamina in equal quantities.
"The HOMC from TPPI will be used to produce unleaded gasoline in Cilacap refinery in Central Java," Hanung said, while refraining from detailing the qualities of the products to be swap.
Hanung said Cilacap, which has an installed capacity of 348,000 barrels per day (bpd), would be producing unleaded gasoline by 2006 when TPPI begins production.
With HOMC supplies from Balongan and TPPI, Hanung said, Pertamina could reduce its reliance on imported HOMC. Pertamina still imports HOMC for the limited production of unleaded gasoline, which averages 5.9 million barrels a year.
"With the two projects, we can stick with our target of supplying unleaded gasoline nationwide," he said.
The company currently produces 14.6 million kiloliters of gasoline per year, including the high quality Pertamax and Pertamax Plus. However, unleaded gasoline is currently only available in Greater Jakarta, in Batam, Bali and Papua, and along Java's north coast.
Pertamina would also increase production of its high quality unleaded gasoline Pertamax and Pertamax-Plus as consumers had responded well to the products.
Production of Pertamax and Pertamax Plus currently stands at 560,000 kiloliters and 100,000 kiloliters respectively per year. The fuels have high octane numbers of between 92 and 95, and a very low lead content.
The octane number is the measure of the detonation quality of gasoline, and the higher the octane number, the higher the resistance to engine knocks.
"We will increase Pertamax output by 10 percent next year because the market has been stable. But for Pertamax Plus, we will increase output by 200 percent because demand is robust. We are looking to produce up to 350,000 kiloliters of Pertamax Plus in 2005," Hanung said.