Pertamina Seeks to Process Crude Overseas to Reduce Import Costs

  • In talks with Asian refiners to process its Basrah Heavy crude
  • Plans to ship fuel from deal to cut Indonesia's energy costs

Indonesia’s state-owned energy company may work with a few refineries in the region as it seeks to reduce the cost of importing oil products and meet a shortfall in processing capacity.

PT Pertamina is in talks with refiners in India, China, Japan, Korea and Singapore to process about 800,000 barrels a month of Basrah heavy crude from its West Qurna-1 operation in Iraq, said Daniel Purba, senior vice president at Integrated Supply Chain, the company’s trading unit. It will send the oil to an overseas plant in shipments of either one million barrels or two million barrels, and pay the fee to process it into either 88-RON gasoline or 92-RON gasoline, Purba said at a press conference in Jakarta on April 4.

“We want to bring in the products to reduce the cost of fuel imports, and hope to finalize the processing deal this year,” said Purba. Pertamina is speaking to refiners including Reliance Industries Ltd., which operates the world’s biggest refining complex, India’s Essar Oil Ltd. and Exxon Mobil Corp.’s unit in Singapore, he said.

Indonesia doesn’t have enough capacity to turn crude into fuel that the country needs. The Southeast Asian nation depended on overseas shipments to meet almost one-third of its domestic demand in 2012, and will import 40 percent of its oil needs by 2018, according to the International Energy Agency. Refining crude overseas will be a temporary solution until Pertamina completes the upgrade of its existing refineries, the company’s Finance Director Arief Budiman said at the same event on Monday.

Pertamina’s Cilacap plant, which currently refines Arabian light oil, is the only facility in Indonesia that can process high-sulfur, or sour crudes, said Purba. The company signed a deal with Saudi Aramco in November to upgrade the Cilacap refinery, which will increase its capacity and allow the plant to process more sour crudes.

Before it's here, it's on the Bloomberg Terminal.