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)