Taiwan firm seeks spot Duri crude on Perta term failure

Taiwan firm seeks spot Duri crude on Perta term failure

SINGAPORE (Reuters): Taiwan state-owned Chinese Petroleum Corp
(CPC) is seeking to source its July Duri crude needs from the
spot market as its term supplier Perta Oil Trading fails to
deliver, traders said yesterday.

They said Perta was unable to deliver because Indonesian state
oil company Pertamina did not allocate any barrels to the
Soeharto-linked company in line with government policy to sever
links with companies that have strong ties with friends and
family members of the former President.

Traders said CPC has a term contract to buy around 15,000
barrels-per-day (bpd) of heavy sweet Duri crude from Perta which
will expire at the end of this year.

Previously Perta, an affiliate of Pertamina, supplied CPC from
the monthly allocations it received from Pertamina.

But early this month, Pertamina said it would stop allocating
crudes to Perta and another affiliate Permindo, in line with
government policy to rid the country of corruption, nepotism and
cronysm.

CPC is the only term buyer of crude from Perta, traders said.
Permindo has no term crude sale contracts.

The remaining monthly volumes that Indoil and Perta were
previously allocated were sold to spot buyers, they added.

For its July monthly crude exports, Pertamina allocated
51,000-bpd of Duri, divided between its term buyers Mitsubishi
Corp and Itochu Corp ,and its two other affiliates Pacific
Petroleum Trading (PPT) and Korean Indonesian Petroleum Company
(Kipco).

Traders said it was unclear if CPC's term contract with Perta
would be terminated, as a result of Pertamina's change in trading
policy.

"CPC wants to terminate, but Perta wants to still hold on,"
one trader said.

Crude

Pertamina official also said that Indonesia was looking to
purchase 1.8 million barrels of gas oil in July through tenders,
the same amount it purchased for June.

But this failed to excite the market as traders were skeptical
that Pertamina will be able to muster up the finance needed for
the imports.

At current market prices, the purchases would amount to about
$30 million.

"I do not think it's prudent for refiners to rely on
Indonesian demand," a trader with a European oil major said. "It
is currently factored in that they can't buy."

The delay of its first purchase tender which was expected to
be issued this week, is hampering market sentiment, traders said.

This will be Pertamina's first foray into the gas oil import
market after breaking its exclusive import contracts with two
affiliates -- Permindo and Perta Oil -- under the reform government
of new President B.J. Habibie.

In other development, Pertamina said it has signed a one-year
term deal with Saudi Aramco.

"The contract is for Saudi Aramco to supply Pertamina with
Arab Light crude for the Cilacap refinery, starting July 1, 1998
to June 30, 1999, with the option to extend it," a Pertamina
spokesman said.

The spokesman said the contract was signed on June 20 in
Dhahran, on the east coast of Saudi Arabia.

Industry sources said the supply would be for around 55,000
barrels per day.

Separately industry sources said a deal by The Broken Hill Pty
Ltd to sell a July cargo of Kutubu crude to Pertamina has been
canceled.

BHP was negotiating to sell 600,000 barrels of the light sweet
crude with Pertamina.

But the deal fell through because Pertamina was not able to
produce letters of credit acceptable to BHP, the sources said.
BHP has now committed the cargo elsewhere, the sources said.

Traders said a planned deal by U.S. Mobil Corp to sell 900,000
barrels of Nigerian Qua Iboe crude to Pertamina has also been
canceled, traders said.

But Mobil has concluded a deal to sell 600,000 barrels of
Kutubu to Pertamina, accepting letters of credit from domestic
Indonesian banks, traders said. Mobil could not be reached for
comment.