Oil producers reluctant to sell their crude to local refineries

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said that he regretted the reluctance of many oil companies in the country to sell their crude oil production at local refineries.

The minister said that the reluctance of many oil producers to sell their crude oil at local refineries had added another difficulty to the government to provide sufficient crude oil supply to the country's major oil refineries.

Purnomo said that the government needed to provide a large amount of cash in U.S. dollar to issue a letter of credit to finance the crude oil imports, which was sometimes diffult to do.

Oil producers in the country which mostly operate under a production sharing contract at a ratio of 85 and 15 percent in favor of the government still prefer to sell their oil to foreign buyers due to the current increases in oil prices in international market.

The local refineries buy crude oil from local producers under a Indonesia Current Price (ICP) formula, which is a flat price valid for a period of six months, based on the average prices of several Indonesian crude. (*)