Payment Issues Delay Iran Oil, Gas Supply

Payment Issues Delay Iran Oil, Gas SupplyPayment Issues Delay Iran Oil, Gas Supply

The Indonesian state-owned oil and gas giant Pertamina is still unable to import crude oil and liquefied petroleum gas from Iran because of payment problems.

Pertamina’s vice president for integrated supply chain, Daniel Purba, said the company plans to import three cargoes of LPG, but there are several issues getting in the way. The main problem is with the payment system.

“Not all banks can facilitate this kind of deal,” Daniel was quoted as saying by Katadata News Agency.

LPG from Iran is important to fulfill Indonesia’s domestic needs because the latter does not produce enough LPG to meet its domestic demand. Pertamina still has to import almost 60% of the LPG used in Indonesia and imports are expected to rise annually in line with increased consumption.

According to Pertamina, LPG consumption last year reached 7 million tons, of which 5.56 million tons were subsidized.

West Java is one of the largest consumers of LPG, at around 1.16 million tons last year. Domestic demand for LPG is projected to reach 7.8 million tons this year.

Purchasing LPG from Iran is the best option for Indonesia. Indonesia's Energy Minister Sudirman Said added that Pertamina would get a discount on its purchase of LPG.

“It’s $25 lower than the market price,” Sudirman explained. Pertamina is also exploring the possibility of buying crude oil from other companies in Indonesia.

Daniel said Pertamina is negotiating with Chevron Indonesia, Total E&P Indonesia, ENI Indonesia and Petrochina. Pertamina hopes to be able to buy up to 200,000 barrels of oil per day by the second quarter of this year.

To maximize the oil supply from overseas and Indonesia, Pertamina currently is planning to rent refineries from several countries in Asia Pacific, such as India, South Korea, Japan, China and Singapore. Those refineries must allocate 800,000 barrels of oil. This state-owned company needs to rent refineries because several types of oil cannot be distilled in Indonesia.

“Only the Cilacap refinery can refine high-sulfur crude oil,” Daniel said.

Daniel hopes that these measures will help to curb fuel imports, as Pertamina aims to cut fuel imports by 1 million barrels a month.

Currently, Indonesia imports 6 to 7 million barrels of fuel with a research octane number of 88.