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Indonesia's Pertamina to boost domestic crude purchases from Jan

Singapore — Indonesia's state-run Pertamina has started increasing its purchases of domestic crude produced by private operators like Chevron from January onwards, as the government tries to narrow its trade deficit and cut down on its import bills.

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The move is in line with a regulation on crude sales issued last year by Energy and Mineral Resources Minister Ignasius Jonan under which Pertamina and other refineries with crude processing licenses are obliged to prioritize buying domestic crudes before imports.

The new policy will result in Indonesia's crude exports shrinking further, lower spot availability of Indonesian grades in the Asian market and prompt its customers to find substitutes, most likely from Middle Eastern oil producers.

Indonesia shipped out less than 500,000 mt of crude oil in November, down 19% from October, and the smallest monthly shipment since S&P Global Platts started tracking the data in June 2015, official data showed Wednesday.

The Southeast Asian country is a net oil importer, but still exports due to logistical issues and to maintain its market presence.

Pertamina already uses a large portion of domestically produced crude grades as feedstock, but equity partners are allowed to sell their share of output without restrictions.

Oil producers are now obliged to offer their crude production to Pertamina and other licensed refineries first, three months ahead of planned exports, before selling them on the market. This also helps the government stem losses from a weak currency.

Pertamina has been negotiating with various oil companies, such as Energi Mega Persada, PetroChina, Petronas and SAKA Energy, over the possibility of buying more of their share of domestic crude output.

MORE CHEVRON CRUDE

Pertamina said it will process more of Chevron's Sumatran Light Crude or Minas Crude and Duri Crude at its refineries, and bought around 2.5 million barrels/month of Minas for the January-June period this year, a senior official said Tuesday.

The first lifting was carried out on January 15, the national oil company's president director Nicke Widyawati said in a statement on Tuesday. Chevron is expected to produce 190,000 b/d in Indonesia this year, down from from 209,478 b/d in 2018. It produced 223,885 b/d in 2017.

"We refer to the government's guidance and have proposed our interest to all oil companies to buy their crude portion. The purchase will be on a business to business basis," Widyawati said.

Pertamina can process Minas and Duri Crude at most of its refineries, except the Kasim refinery in Papua. They are compatible with the configuration of their refineries and will increase the yield of valuable products, Widyawati said.

Pertamina is able to cut its crude imports by at least 3 million barrels/month by boosting domestic grades, including 2.5 million barrels/month from Chevron, Pertamina's senior vice president for integrated supply chain Hasto Wibowo said.

He said Pertamina usually imports about 11 million barrels/month of crude. Pertamina owns and operates seven oil refineries with a total installed capacity of 1.05 million b/d.

-- Anita Nugraha, newsdesk@spglobal.com

-- Eric Yep, eric.yep@spglobal.com

-- Edited by Norazlina Jumaat, newsdesk@spglobal.com