Plan to prevent oil shortage unveiled

The Jakarta Post, Jakarta

State oil and gas company Pertamina will urge the government to request production-sharing contractors not to export crude oil in case of an oil shortage caused by an increasingly likely war in Iraq, a Pertamina official said on Wednesday.

"The contractors should focus on meeting the Indonesian domestic oil demand, if the war breaks out and leads to an oil shortage," Pertamina's spokesman Ridwan Nyak Baik told The Jakarta Post.

Pertamina, which has lost much of its monopoly under the new Oil and Gas Law, however remains the only authorized supplier of fuel in the country until 2005.

Ridwan said Pertamina estimated that the fuel supply in the country would remain secure, if war breaks out and quickly ends. However, Indonesia could face an oil crisis, if an Iraqi war lasts for more than three months.

In that case, the country's oil contractors should help deal with the crisis.

Although under the agreements contractors have no obligation to sell their oil shares on the domestic market, they are morally obliged to secure oil supplies in the country, Ridwan said.

"They (the contractors, predominantly multi-national corporations) have been operating here for years. It won't be too burdensome for them to stop exporting crude oil for two months, for example," said Ridwan.

Ridwan assured that Pertamina on behalf of the government would buy the crude oil at market prices.

Separately, Rachmat Sudibyo, the head of upstream authority BP Migas, hinted that BP Migas might meet Pertamina's request in the event of an oil shortage.

"We may urge them to do so. However, we must prepare enough funds for that, because we should buy the crude oil at market prices," Rachmat told the Post.

Indonesia is a net oil exporter with the production of about 1.2 million barrels per day (bpd).

However, Indonesia imports about 250,000 bpd from Middle Eastern countries for some refineries in the country, including the country's largest refinery in Cilacap, West Java, which are designed to only accept high quality crude such as that produced in the Middle East.

Pertamina operates nine refineries, but their output could only meet 80 percent of the country's fuel demands which total 60 million kiloliters a year. The remaining 20 percent should be imported.

According to Ridwan, some local crude oil could replace Middle Eastern oil, including the Minas crude produced by PT Caltex Pacific Indonesia in Riau and the Attaka crude produced by PT Unocal Indonesia in East Kalimantan.

In anticipation of a possible war, Ridwan said, Pertamina has also planned to reschedule overhaul projects at its refineries in Balikpapan, Balongan and Plaju.

The maintenance service was initially scheduled for this year, but if the war breaks out, the work would be postponed until next year, he said.

"The overhaul rescheduling is important, because it will allow Pertamina to keep up fuel production at the optimum level," he said.

A refinery must stop operating for 30 to 50 days during an overhaul, Ridwan explained.

Meanwhile, Minister of Energy and Mineral Resources Purnomo Yusgiantoro told reporters on Wednesday he had formed a task force to study ways of securing fuel supplies on the domestic market in the event of an Iraq war.

"Based on our scenario, war could last for about two to six weeks," he said.

He said at present Pertamina had a fuel stock enough for domestic consumption for 25 days.

Saudi Arabia, which supplies crude to the Cilacap refinery, has promised to keep shipping its oil to Cilacap despite any war. This, Purnomo said, made Indonesia feel assured that there would not be a fuel shortage in the country over the next 35 days.

"I hope the task force will find a breakthrough," Purnomo said.