Pertamina to Become Diesel Exporter

Indonesia’s Pertamina has received a license from the government to export diesel for the first time, three sources close to the matter said on Monday, although the state oil company is planning to prioritize domestic sales.

Pertamina is typically an importer of diesel, but inbound shipments have declined over the years as it ramped up refining output and demand from the mining sector slowed, Reuters reported.

With other diesel sellers—such as Royal Dutch Shell, Exxon Mobil Corp and Solaris Prima Energy—crowding into the retail market, and an increased biodiesel mandate in 2016 reducing conventional consumption, Pertamina’s supply of the fuel has also outperformed demand, said Toharso, director of refineries at Pertamina, who goes by one name.

If Pertamina exports its surplus fuel, it would help ease supply tightness in Asia caused by Tropical Storm Harvey, which drove up the Asian diesel margins to a one-and-a-half month high, traders said.

The company, though, is also taking steps to sell more diesel into its domestic market by asking the government to grant it a monopoly on diesel imports, which would force the other retailers to buy from Pertamina.

The state oil company received the diesel export license two to three weeks ago and it is developing a standard operating procedure on how to export the cargoes, the sources said.

Still, “we will try our best to sell in the domestic market,” Toto Nugroho, senior vice president at Pertamina for integrated supply chain, told Reuters.

But if market competition means storage inventories build up, “the last resort is to export”, he said.

The official declined to give details on possible export volumes or a timeline of shipments.

"Pertamina supplies about 70% of Indonesia’s diesel needs, while private firms supply the rest," Toharso said.

Many of the private firms import their diesel, but Pertamina is lobbying Jakarta to name it the country’s exclusive importer of the fuel, a move that would alleviate the state oil company’s surplus and possibly negate its need to export the fuel.

“Pertamina is encouraging the Energy Ministry to make other companies not to import diesel and just buy it from Pertamina,” said Toharso.

Indonesia’s Energy Ministry did not address a Reuters query asking if it will approve Pertamina’s request.

Dadan Kusdiana, a spokesman for the ministry, said it will “encourage retail companies to purchase from Pertamina first before they import”.