Government plans to hedge oil price to save budget

The government has decided to hedge the price of its crude oil production following a sharp decline in world benchmark prices in an effort to safeguard its 2002 budget, a state official said on Wednesday.

Minister of Mines and Energy Purnomo Yusgiantoro told reporters that the hedged price was expected to be some US$22 per barrel, but details had yet to be finalized.

"The hedging is being done to safeguard the budget. Up until now the hedging price has not been settled but it may be around $22 per barrel," he said as quoted by Reuters.

Indonesia, Asia's only OPEC member, assumed an oil price of $22 a barrel in its 2002 budget, but current levels stand at about $15, well below next year's target. World prices have slumped more than 25 percent since mid-September.

Indonesia's 2002 budget assumes a crude production of 1.32 million barrels per day (bpd). In October, the country pumped 1.1 million bpd.

State oil and gas company Pertamina said four companies were taking part in the hedging negotiations.

"The price and volume have not yet been decided...but around four companies, including Bank of America, are in the negotiations," said Baihaki Hakim, president director of Pertamina.(*)