Pertamina seeks term oil on shortage fear

Indonesia has taken the unusual move of seeking oil products on a six-month term basis from October, as concerns grow that supply shortages could trigger civil unrest, traders said yesterday.

They said Indonesian state oil company Pertamina has issued its first ever term tender to buy diesel, kerosene and fuel oil to be delivered between October 2000 and March 20001.

The tender, which closes on August 14, seeks 400,000 barrels of diesel, 800,000 barrels of kerosene and 600,000 barrels of fuel oil per month over the six month period.

Pertamina also tendered for 300,000 barrels a month of 97 octane unleaded gasoline for October 2000-March 2001, after sealing its first ever term deal with Caltex for 300,000 barrels a month of 92 octane gasoline for delivery August-December 2000.

The state oil monopoly is also in talks with Singapore refiners to process crude in another move to ensure secure supply of petroleum products.

Normally, Pertamina covers the bulk of its over 150,000 barrel per day (bpd) oil product requirements by purchasing spot cargoes on a monthly basis.

It's only term contract is an evergreen contract to take yearly supplies of diesel from oil producer Kuwait, although a fire in late June fire that razed Kuwait's 485,000 bpd Mina al-Ahmadi refinery had cut shipments to Indonesia to just one cargo for August, from the usual two to three cargoes monthly.

Traders said concerns over shortages in the country had convinced Pertamina to seek more secure supplies.

"The shortage in kerosene and gasoline had created problems in the domestic market last month, so they want to secure supplies in advance and not have to go through that again," said an Asian trader.

Last month, a shortage of key oil products such as gasoline and kerosene, a common cooking fuel, forced Jakarta residents to queue for hours to get supplies.

Supplies and prices of gasoline and kerosene are sensitive issues in impoverished Indonesia and have sparked instability and civil unrest in recent years.

The domestic supply shortage was partly due to the month-long shutdown of the 125,000 bpd Balongan refinery, which resumed production only in late July, after several failed restarts.

Supply worries arise as winter nears

Traders said Pertamina was particularly worried that kerosene would be scarce in coming months as the world demand for the product, which is also used as a heating fuel, surges during the northern hemisphere winter.

"They are looking for some sort of security of supplies, especially since in July, they did not manage to buy enough kerosene on the spot market," said a trader.

Traders said an explosion at the Balikpapan 2 refinery on Monday, which led to a prolonged shutdown of the gasoline producing platformer unit, had aggravated supply woes.

The 220,000 bpd Balikpapan 2 crude unit has resumed production at 65% of its capacity, but the platformer unit remains down, and was unlikely to resume operations for another four to five months.

There were also plans to shut down a 118,000 bpd crude unit at Cilacap for a month from September for routine maintenance. (*)