Pertamina to cut kerosene supply to stop smuggling

JAKARTA (JP): State oil and gas company PT Pertamina said on Tuesday it would cut its kerosene supply to Jakarta and West Java and verify the demand for diesel in both areas to prevent fuel smuggling.

Director of supply and domestic trade for Pertamina Harry Poernomo said the company would reduce its kerosene supply to both areas to 12,500 kiloliters per day from 14,300 kiloliters.

Pertamina would also check the diesel consumption level of its industrial customers and reduce supplies if it found they were buying in excess of their needs, he said.

He said the move was expected to slash the alleged oversupply which is blamed for a reported rise in fuel smuggling.

"We will cut the supply and see how the market reacts," he said after a meeting with several kerosene wholesalers and diesel transportation companies from West Java and Jakarta.

In the past few days, local media reported alleged smuggling of tons of fuel from several coastal areas in North Jakarta, including the Cilincing fishing port.

Daily Kompas said the smugglers allegedly bought the fuel from Pertamina and sold it at a higher price overseas, possibly to Singapore.

The smugglers reportedly raked in huge profits as the heavily subsidized fuel prices on the domestic market are much lower than international prices.

The trade has reportedly been going on for at least four years, causing billions of rupiah in losses to the state.

Harry said Pertamina sold its kerosene to wholesalers who sell the fuel to end-users through retailers. However, Pertamina sells diesel directly to industrial customers based on their orders.

Harry said Pertamina could not keep track of its fuel after it was purchased by customers.

"Customers are no angels," he said.

He said he was unaware if Pertamina's employees were involved in the smuggling. "Let's wait for the results of the police investigation."

Head of Pertamina's West Java and Jakarta supply and domestic trade Tuty Anggrahini said demand for kerosene in Jakarta and West Java remained stable at 12,500 kiloliters per day over the past 10 years.

She said Pertamina increased kerosene supply by 14 percent to 14,300 kiloliters per day as of February following media reports the fuel disappeared from the market on the back of the government's plan to hike prices on April 1. The government postponed the plan at the eleventh hour.

Tuty suspected the additional supply caused a glut and boosted the likelihood of smuggling.

"You all reported kerosene disappeared and now look what happened," Tuty quipped to reporters.

She said the cut in the kerosene supply would return it to its previous level of 12,500 kiloliters per day.

She also believed industrial demand for diesel probably declined in recent years as the economic crisis forced many factories to close and operate below capacity.

"However, throughout these times, orders for diesel from the factories remained unchanged," she added.

Tuty said Pertamina would have to determine the actual demand of the businesses. (bkm)