Saturday, 3 September 2016
State-owned oil and gas company Pertamina has amended a crude-processing deal with Royal Dutch Shell in order to accommodate Indonesia’s rising use of non-subsidized fuel.
In June, Pertamina appointed Shell to process 1 million barrels of crude oil every month that it purchased from Iraq. Shell will process the crude into Premium brand gasoline — subsidized fuel with a research octane number (RON) of 88 — at a Singapore refinery to minimize Indonesia’s fuel imports.
However, Pertamina has seen demand for the 92-octane Pertamax gasoline rise exponentially to around 15,000 kiloliters per day since the Idul Fitri festivities in July from the previous 8,000 to 10,000 kl per day.
The increase in demand has pushed Pertamax’ imports to 3 million barrels per month from around 1.25 million barrels per month.
“When we first discussed the crude processing deal [in June], we only requested that it be processed into Premium 88,” said Daniel S. Purba, Pertamina’s senior vice president of the integrated supply chain unit.
“However, Pertamax demand has risen, so we have requested more flexibility that will enable the processing into other fuels, including Pertamax and jet fuel, which we have imported all this time.”
Indonesia has struggled to keep fuel imports down while consumption continues to rise every year, reaching around 1.6 million barrels of oil per day (bopd) by the end of 2015.
The country recently needed to import 9 million barrels of oil per month amid domestic production of 4.5 barrels of oil per month. However, since Pertamina secured the lion’s share of PT Trans Pacific Petrochemical Indotama (TPPI) in October, it managed to push its total fuel imports to 7 million barrels of oil per month.
The decision to move forward with a crude processing deal with Shell stemmed from Pertamina’s desire to decrease direct purchases from abroad. The crude processing deal is considered a good compromise as most of its crude purchased from the Middle East cannot currently be processed at domestic facilities and as it reduces direct imports by around 15 percent.
The crude that will be processed at Shell’s refinery in Singapore will come from Iraq’s West Qurna 1 block, which reportedly produced 33,500 bopd last year. The crude processing deal will run until the end of the year, after which Pertamina will review whether or not to extend the cooperation.
Singapore is not the only place Indonesia hat set its sights on. Daniel explained that there had also been offers to process crude in India, South Korea and Taiwan.
Even though such processing deals can reduce direct imports, they only offer a temporary solution. Pertamina is still keen on building new refineries and upgrade existing ones.
In June, Pertamina inked a deal with Russian oil and gas giant Rosneft to build a refinery in Tuban, East Java, with a processing capacity of 300,000 bopd.
The Cilacap refinery in Central Java is also being upgraded in partnership with Saudi Aramco.
Source by: The Jakarta Post