Pertamina to buy crude from local producers at market price

State Minister for State Enterprises Sugiharto has said that Pertamina's plan to purchase crude oil from local oil producers should be carried out in accordance with a normal market mechanism, Koran Tempo reported on Saturday.

"It means that Pertamina should join the normal bidding process, and should also compete with foreign buyers," the minister said.

He did not, however, ruled out the possibility that the production-sharing contractors (oil producers) refuse to sell their crude oil to Pertamina. "It is quite possible that Caltex (for instance) prefers to sell its crude oil to Singapore's refinery plants. But it could be negotiated," he added.

Indonesian oil producers produce their oil under production sharing arrangement with the government. Under the existing production split agreement, about 85 percent of the net oil production are allocated for the government, and the other 15 percent for the producers.

Pertamina has been asked to buy crude oil from local oil producers to meet the needs of its refinery plants in a bid to reduce the use of U.S. dollars to finance the crude oil imports.

Pertamina needs at least US$1.1 billion a month to finance crude oil imports. The purchase of the American currency to import the crude oil has often jeopardized the foreign exchange trading in the country. Early this week, Rupiah dropped to nearly Rp 10,000 against the U.S. dollar from about Rp 9,500 due to a massive purchase of the American currency by Pertamina. (*)