Riau Islands, haven for fuel smuggling
Fadli, The Jakarta Post, Batam
Out-Port-Limit (OPL), or the sea area on the border between Indonesia and international waters, has for years been the site for illicit fuel transactions between Indonesian companies and their foreign counterparts. Indonesian companies smuggle out the fuel on the back of fuel price disparities between Indonesian and neighboring countries, notably Singapore.
The latest transaction happened last month when the Jaya Success tanker transferred some 120 tons of diesel fuel into the Aiwa Maru tanker flying a Honduran flag in an OPL on the west side of Batam.
The operation began with two companies hiring the tanker ships. An Indonesian company and a Singaporean company negotiate the price for a quantity of diesel fuel. After both companies strike the deal, the Indonesian company, a business partner of state oil and gas company PT Pertamina, hires a tanker to undertake the transaction, as does the Singaporean company.
Both tanker ships arrive at a predetermine location, and pull up alongside each other. Using a long pipe, the Indonesian tanker ship pumps diesel fuel into the Singaporean vessel.
However, before the Jaya Success could finish filling the Aiwa Maru tanker with diesel fuel, an Indonesian Navy vessel appears and seizes the two vessels.
This modus operandi has been common in recent years especially as the price disparity of fuel between Indonesia and its neighbors, notably Singapore, has become wider.
The high cost of unsubsidized fuel in neighboring countries has attracted many Indonesian companies to smuggle fuel out of the country. Heavily subsidized diesel fuel retails in Indonesia for Rp 2,200 (21 U.S. cents) per liter, while in Singapore it costs the equivalent of Rp 6,000 .
The smuggling was able to occur because the Indonesian companies, partners of Pertamina, did not sell to the public all the fuel they had bought from Pertamina through a quota system. Instead of selling all the fuel to the public, as it is obliged to do through a legal agreement with Pertamina, the companies only sell a portion of the fuel to public, while the remainder is sold to foreign companies for a much higher price.
Most fuel smuggling occurs in the waters of Riau Islands province, located near busy international shipping routes and bordering a developed and energy-hungry nation, Singapore.
The chief of Pertamina's Batam branch, Nono Asmanu, denied on Friday that Pertamina officials were in cahoots with Pertamina partner companies in smuggling the fuel. Nono said that there was little possibility that fuel from Batam, especially diesel fuel, could be smuggled out to Singapore.
"The fuel quota set for Batam is 800,000 kiloliters for diesel and 200,000 kiloliters for Premium. The quota is too small compared to the quota given by central Pertamina to Pertamina branches on the island of Java," said Nono.
Nono also asserted that his office had taken stern measures against Pertamina partners smuggling fuel to other countries.
Nono is currently being questioned by Batam Police over rampant fuel smuggling that has occurred in Batam in the past few years.
The questioning is being carried out in the wake of large scale operations against fuel smugglers. President Susilo Bambang Yudhoyono announced on Thursday that the authorities have so far seized 17 ships and arrested 58 people, 18 of them Pertamina officials, in recent antifuel smuggling operations.