Pertamina to reach deal with Caltex over CPD by year-end

Pertamina to reach deal with Caltex over CPD by year-end

JAKARTA (JP): State oil and gas company Pertamina said on
Tuesday it expected to conclude the negotiation of a crude-
processing deal (CPD) with Singapore-based Caltex Corp., by the
end of this year as part of the effort to guarantee domestic fuel
supplies.

Pertamina downstream director Muksin Bahar said that both
companies were now still negotiating prices under the so-called
"deemed CPD".

"We hope Caltex can lower its prices," he told a press
conference, adding that Pertamina was negotiating a deemed CPD of
about 1.8 million barrels per month or 60,000 barrels per day
(bpd).

He said that Pertamina had a benchmark for the CPD prices
based on Pertamina's processing "fee" charged by its own
refineries of between $1.7 and $1.8 per barrel.

Indonesia has often had trouble in meeting domestic fuel
supplies because its refining capacity is only about the same
size as domestic demand.

Some 75 percent of the demand is usually fulfilled locally
while the remaining 25 percent is covered by imports based upon
long-term contracts, oil spot market procurement, and CPDs.

Pertamina refinery capacity is about 1 million barrels per
day, producing about 750,000 barrels of fuel per day.

Last year, local fuel demand reached 54.7 million kiloliters
(344 million barrels), of which 36.8 million kiloliters were
provided by the country's refineries, 13 million kiloliters by
the spot market, 0.6 million kiloliters based upon long-term
contracts, and 4.3 million kiloliters through CPDs.

The CPD, which has so far been with the Shell Group refinery
in Singapore, ended in March without renewal.

Muksin said that the deemed CPD would be different from the
previous CPD from Shell because the deemed CPD would not require
crude oil from the country.

"The administration will be simpler," he said, adding that
deemed CPDs would be the trend for CPDs in the future.

For this year, Muksin said, about 4 percent to 5 percent of
the expected 52.7 million kiloliters of domestic fuel demand
would be covered through CPD.

According to him, the deemed CPD plan would help control fuel
prices on the spot market because Pertamina would not have to
purchase fuel from the market in huge quantities should shortages
emerge at home.

"Basically, we don't want to buy a lot of fuel on the spot
market because it can drive fuel prices higher," he said.

According to him, it was safer to buy fuel through CPDs
because the prices would be stable for three to six months.

Caltex was established by U.S. oil companies Chevron Corp. and
Texaco Inc. to handle downstream activities such as refining.

It owns one third of the 285,000 barrels per day capacity of
the Singapore Refining Co. facility.(iwa)