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Pertamina to buy domestic crude oil to boost supply
Pertamina will buy crude oil from several oil contractors operating in the country in a bid to secure the national energy supply, with the state oil company now negotiating a lower price
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ertamina will buy crude oil from several oil contractors operating in the country in a bid to secure the national energy supply, with the state oil company now negotiating a lower price.
Under an existing production sharing contract (PSC) scheme, the output from oil fields is divided between the government and the companies operating the fields. The government is usually entitled to 85 percent of oil output and operators are entitled to the remaining 15 percent.
The operators are free to deliver their oil production anywhere, either to the spot market or to their affiliated refinery networks worldwide. Pertamina is considering buying the oil operators' portions for domestic use.
Pertamina president director Dwi Soetjipto said on Tuesday that the company was currently in price negotiations with a number of oil and gas companies that hold significant stakes in crude production in the country.
'As long as the price is lower than the price we have to pay for imports, we will purchase the crude. We are expecting to secure deals within this first quarter,' Dwi said.
He said, however, that negotiations would take time because the oil companies would first have to settle earlier contracts with buyers.
The plan to buy from the oil contractors is part of Pertamina's efforts to reduce huge imports of the commodity and its related products, which has hurt the country's trade balance.
Most oil companies working in the country only run production businesses while the trading of the commodity is handled by their parent firms' trading arms, which run businesses overseas, such as in Singapore.
Therefore, if Pertamina wants to buy their oil shares, it has to settle the issue with Singapore-based trading arms, meaning that the product will be seen as an imported commodity. Such imports are subject to 3 percent tax.
The Upstream Oil and Gas Regulatory Special Task Force (SKKMigas) earlier made an appeal to the Finance Ministry to waive the 3 percent tax. However, Finance Minister Bambang Brodjonegoro rejected the appeal, saying such an exemption would not be prudent.
Indonesia produces around 800,000 barrels of oil per day (bopd) but the country's demand is equal to 1.6 million barrels per day. Therefore, the country, which recently reactivated its membership in the Organization of Petroleum Exporting Countries (OPEC), depends on imports.
Meanwhile, Pertamina inked on Tuesday contracts to import liquefied natural gas (LNG) cargoes with France's Total SA.
Under the deal, Total will purchase Pertamina's contracted Corpus Christi LNG at between 0.4 million to 1 million tons per year starting from 2020. In return, Total will supply LNG cargoes to Pertamina of the same volume from the French's firm assets.
Total has not revealed which of its fields will supply Pertamina in the exchange. The deal will last for 15 years.
'These agreements allow the group to further expand its longstanding cooperation with Pertamina and to enhance both companies' LNG portfolios. Strengthening our presence in Asia, in particular through innovative relationships with new LNG buyers such as Pertamina, is an important part of our strategy,' Total's president for gas Laurent Vivier said in a written statement.
Pertamina and Corpus Christi Liquefaction LLC reached a deal in 2013 and 2014 for the sale and purchase of 1.52 million tons per year of LNG.
