Refinery closure causes few oil ripples

Refinery closure causes few oil ripples

SINGAPORE (Reuters): The closure of Indonesia's 125,000 barrels-per-day (bpd) Balongan refinery was unlikely to prompt a pick up in oil product imports in March, traders said yesterday.

Indonesia's oil product imports have ground to a halt amid the countries worst economic crisis in decades.

But Balongan is mostly geared to exports of oil products, so the biggest impact could be on Indonesia's dollar earnings, oil traders said.

They said state-owned Pertamina had not issued any requirements to the market for key middle distillate imports to cover the loss of production from Balongan, raising the prospect of continued zero product imports.

But the closure could ease some extra Indonesian crude onto the international spot market, traders said.

A source close to the refinery said on Monday that the complex was shut down last week for one month because of mechanical problems.

The long shut down period reflected the time it would take to get spare parts, the source said.

The refinery is largely geared to exports with its 83,000 bpd catalytic cracking unit providing gasoline and naphtha, which will impact dollar earnings as the country battles against its worst currency crisis in decades.

Oil traders said that the news had not led Pertamina to look for any product supplies in the spot market.

While it would mean more supply of crude into the market, traders were bullish that trading differentials would not be hurt.

The shut down was expected to push more heavy crudes into the March market, but ample buying interest was likely to support the price, crude traders said.

Balongan processes mainly heavy Duri and Minas crudes.

"There may be extra Duri available, although we haven't seen any barrels yet apart from the allocations," said a trader with a major oil company.

"But the last trades were at high premiums, and I think these can still hold," he said.

In recent weeks light crude grades have been falling in price, but heavier grades have found strong support.

Traders said they estimated that Indonesia had not made any oil product imports in February.

Pertamina rolled into March term deliveries that were scheduled for February of 135,000 tons of gas oil and kerosene from Kuwait.

But traders had also said that Indonesia was not planning to import fuel oil in February or March either. It normally imports around 200,000 tons per month.