Indonesia not to change crude pricing formula

State oil and gas company Pertamina had refrained from changing pricing formula of Indonesian crude used for long-term crude contract and opted to stick to old pricing formula instead, a government source said Tuesday.

Last month Pertamina told importers that it intends to include price assessments by Petroleum Argus Ltd., a U.K. specialist oil publication, in its pricing formula starting as early as July.

Importers, especially Japanese buyers objected to the change, since they believed the inclusion of Argus assessments would result in higher prices for the Indonesian Crude Price, or ICP. They fear that the assessments tend to be higher than similar assessments by Platts and Rim Intelligence - two other specialist energy publications - that currently dominate the term pricing formula.

Officials at Japanese oil companies have told Pertamina about worries that the proposed change in the pricing formula could push up their purchasing costs for Indonesian crudes, traders said.

The source did not say the whether the decision to stick to the old pricing formula was caused by importers? objections.

The current ICP, as agreed between Pertamina and its term buyers in 1999, is made up 40 percent of Platts assessments, 40 percent of assessments by Rim Intelligence and 20 percent by the Asian Petroleum Price Index, or APPI. APPI is a widely used marker for Southeast Asian crude prices that is compiled by an accountancy firm.

Rising ICPs would also be a direct blow to Japanese power and gas utilities that import Indonesian liquefied natural gas, as their LNG contract prices are linked to the price of Indonesian crude. (godang)