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tate oil and gas giant Pertamina claims to have saved US$122.2 million in the procurement of crude and petroleum products during the first seven months of the year due, in part, to a reinvigorated logistics system spearheaded by its Integrated Supply Chain (ISC) unit.

Pertamina’s senior vice president of the ISC unit, Daniel Purba, said the figure for the January-July period had surpassed the annual value creation target of $100 million, which Pertamina expects to support its business expansion, including by securing overseas oil and gas supplies.

Daniel said his unit had undertaken numerous efforts to increase efficiency in oil and gas procurement since it took over authority to handle the task last year from the notorious Pertamina Energy Trading Ltd. (Petral). He claimed procurements were now handled in more transparent auctions and with shorter import procedures.

“We are open to all business players to partake in our oil and petroleum auctions, in which they have to bid for the most competitive price to win the tender. In return, we can get the lowest price,” Daniel told a press briefing in his office recently.

Pertamina estimates it could save $651 million to 2017 following the formal liquidation of its Singapore-based subsidiary Petral, the operation of which was cancelled due to allegations of corruption and illicit practices in procurement.

The full liquidation of Petral, meanwhile, is still pending the debt clearance of its two subsidiaries, namely Zambesi Investment Ltd., which was established in 1979 and based in Hong Kong, and Pertamina Energy Services Pte. Ltd., which was created in 1992 and incorporated in Singapore.

In order to achieve the desired result, the ISC unit has established a plan consisting of three phases with different initiatives for each phase. The open-to-all auction system was included as one of the first initiatives, Daniel said.

Contacted separately, energy think-tank ReforMiner executive vice director Komaidi Notonegoro said the July result was evidence that Pertamina’s effort to promote efficiency through its ISC had borne fruit.

“Pertamina lacked thorough information regarding oil and gas procurement when Petral controlled the system,” Komaidi told The Jakarta Post.

At present, the ISC unit is also focusing on procuring domestic crude oil from oil and gas cooperation contract holders (KKKS) to reduce the country’s reliance on imported oil. It is also conducting various tests to identify which forms of crude oil can be processed in Pertamina’s refineries in an economical way.

Daniel said the ISC unit aimed to procure 200,000 barrels of oil per day (bopd) from KKKS. KKKS mostly have overseas trading arms, but currently only manage to buy around 12,000 bopd due to what Daniel called “taxation constraints” stipulated in a 2015 regulation issued by the Finance Ministry.

The 2015 regulation stipulates that KKKS with overseas trading arms have to pay 3 percent in income tax for imported goods (PPh 22). The ISC unit has asked the Finance Ministry to exclude them from the PPh 22 obligation, Daniel said.

“If our request is granted, we could secure around 200,000 barrels [of oil per day] for Pertamina’s refineries in order to meet domestic demand,” he added.

Data from the Energy and Mineral Resources Ministry shows that, starting next year, there will be a gap between the country’s oil supply and demand. By 2020, supply is forecasted to decline to 1.8 million bopd from 2.19 million bopd in 2015, while demand could potentially increase to 2.6 million bopd from 2.19 bopd. (mos)