Pertamina to change its oil price formula
Pertamina to change its oil price formula
JAKARTA (JP): The state-owned oil company Pertamina will next month change its crude oil price formula, probably increasing prices by between 10 and 20 U.S. cents per barrel.
"We'll change the formula for the price calculation to fine- tune our oil prices to market developments," Pertamina's general affairs director, Baharuddin, told the press here yesterday after a ceremony for the signing of a cooperation agreement involving the company, the office of the state minister of environment, Bandung Padjadjaran University and Bogor University of Agriculture.
He said that Pertamina had proposed the change of the formula to the government. "Hopefully the government will approve the proposed change," he said.
Baharuddin said that Pertamina currently calculates its monthly crude prices on a formula giving a 50 percent weighting to crude oil price assessment on the APPI (Asian Petroleum Price Index). The other half is based on spot prices, weighted 50 percent on APPI, 30 percent on Platt and 20 percent on RIM.
Pertamina, he said, is considering reducing the influence of the APPI price index. Using the APPI twice in the price calculation is not favorable. "So if the market prices of oil used for the APPI index decline, our prices will be much lower than market prices," he said.
"We will therefore use the APPI only once and increase the weight of Platt and RIM indices; this will enable us to follow the price fluctuations of the market," he noted.
He added that the new calculation formula could be changed into using only three components: 40 percent APPI, 30 percent Platt and 30 percent RIM.
Baharuddin noted that Pertamina had notified its buyers on the planned change. "Of course they protested about the change, but I think there will be no change in their buying patterns," he said.
Reuter last month quoted traders from Japan -- the largest importer of Indonesian crude oil -- as saying that the new formula will probably not affect their buying patterns in view of the high quality (low sulfur content) of Indonesian crude oil.
According to Baharuddin, oil prices on the world market currently average US$18 a barrel.
Indonesia exports about 800,000 barrels of crude oil per day. (13)