Pertamina wants govt to buy its crude at market price

Pertamina has demanded the government to buy its crude oil at international (market) price to ensure that the state owned oil and gas company would not suffer a loss in fulfilling the obligation to sell part of its crude for local use, Koran Tempo reported on Thursday.

Pertamina made its demand during a negotiation held in Jakarta recently.

Under the contractual "domestic obligation" clause, oil producers are required to sell part of its crude oil to the government for the production of fuel for local use. The price is set at 15 percent of the price of the crude oil in the international market. Before the introduction of the new oil and gas law in 2002, Pertamina was exempted from this obligation.

Director General of Oil and Gas, Iin Takhyan, said that he understood Pertamina?s problem and said that the government was still assessing if the government could fulfill its demand.

Iin said that the Ministry of Energy and Mineral Resources, in principle, agreed with Pertamina?s demand. ?We are still studying which institutions have the rights to make a decision on the matter: the Ministry of Energy and Mineral Resources or Ministry of Finance. If we have the rights to do so, we will immediately fulfill Pertamina?s demand,? he said.

Iin acknowledged that buying the crude oil at international prices would certainly raise the costs of fuel production domestically. ?But this will not affect the price of fuel in the domestic market because the government will continue to provide a subsidy,? he said. (*)