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)