INDONESIA - Indonesian Oil Imports & Regional Processing.

Pertamina imports crude oils from the Middle East - mainly from Iran, Iraq, Saudi Arabia and Yemen - and from neighbouring Malaysia and Australia. Some of the grades purchased have high distillate yields. It has also bought sweet crude oils from West Africa.

A part of the crudes is processed in Singapore for Pertamina's account. Pertamina has an on-and-off processing arrangement with Singapore's 285,000 b/d SRC refinery in which Singapore Petroleum (SPC) has a one-third stake along with BP and ChevronTexaco (see background in Vols. 56 & 60, No. 11). Pertamina imports oil products from Kuwait (KPC), other Gulf refiners and from the spot market.

Pertamina is the sole firm purchasing crude oils and products on behalf of the state. Its trading unit, Pertamina Energy Services (Petral), does the buying from the spot market. Petral imports gasoline and gasoil mainly from Singapore, and occasionally from South Korea. But Pertamina will eventually lose its monopoly over the import of crude oil and petroleum products as the domestic market will be deregulated.

Pertamina, created in the late 1960s, has been functioning as a limited liability company since April 2003, when its restructuring was completed. It will be privatised as from late 2005 or in 2006, when the local downstream sector will have been made open to foreign investment and competition. Pertamina plans to have its initial public offering (IPO) in early 2005 have been put off for several months.

In early 2003, then President Megawati Sukarnoputri signed a decree setting up an agency to regulate the domestic oil market. Pertamina will retain its distribution and marketing role until fuel subsidies are removed. This is not likely to occur before 2006 as the government in early 2005 kept fuel subsidies, although it raised the domestic prices of gasoline and diesel (see DT No. 9).

Exports, Marketing & Pricing: Most of Indonesia's oil and condensate exports go to Japan and other Far Eastern markets. Crude oils and condensates are marketed by both Pertamina and the production sharing (PSC) operators like ChevronTexaco, Total/Inpex, PetroChina, CNOOC, Unocal, BP, ConocoPhillips and ExxonMobil. Indonesia's crude oils also trade freely on the spot market.

Pertamina issues the official Indonesian Crude Price (ICP) on monthly basis and in agreement with the PSC companies. The ICP is issued retroactively at the end of the month.

Most of Indonesia's refineries process local heavy/sweet crudes, like Duri and Widuri, which are waxy and have a high yield of low sulphur waxy residue (LSWR). But they are poor in middle distillates.

Indonesia cannot use most of its LSWR. It exports the residue to power plants in Japan, South Korea, etc. But LSWR exports will decline when two new export refineries in Indonesia begin to crack the residue (see DT No. 10).

Pertamina is importing low sulphur Yemeni Marib Light. It is also importing heavier crudes with a high yield of residual fuel which catalytic facilities, such as the one in Cilacap, crack into value-added gasoil and jet kerosine.

Regional Trade & Processing/Storage Role: Provided that Indonesia will not be broken up into chaotic entities in the years ahead, this country could become a more important player on the market between the Middle East and the oil consumers east of the Malacca Straits. Two major oil storage and processing projects for this have been affected by the Asian economic crisis, however.

Central factors are: the Sijori Triangle of rapid business growth, between Singapore, Riau province (Indonesia) and Johor (Malaysia), agreed on in 1992; and the Indonesia-Malaysia-Thailand Growth Triangle - IMT-GT, set up in 1994 involving North Sumatra, Malaysia's Penang and Kedah, and Thailand's southern provinces of Satun, Songkha, Yala, Narathiwat and Pattani. The two alliances, dormant for several years, would be revived after the region's economic growth becomes more rapid.

Investment from these areas and other ASEAN states would concentrate on the following: energy and industry, with emphasis on processing facilities which will be badly needed in the area when higher growth rates occur; communications and transport, with the ASEAN region to need at least 100m new cars by 2010 if rapid economic growth rates resume; tourism, agriculture and fisheries, to become high-growth sectors; and free trade, with Indonesia, Malaysia, Thailand and the other ASEAN states committed to execute the Asian Free Trade Area Agreement.

In the first triangle Indonesia, Singapore and Malaysia have agreed to build a crude oil blending, storage and terminal centre on a Riau island off Central Sumatra (see Vols. 56 & 60, No. 11).