Pertamina to boost unleaded gas supply

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.