Per­tam­ina may strug­gle to com­ply with Jokowi’s plan to re­duce air pol­lu­tion

New Straits Times - - Business -


PRES­I­DENT Joko Wi­dodo is push­ing ahead a plan to re­duce air pol­lu­tion, and his na­tion’s state fuel maker is strug­gling to keep up. While the ad­min­is­tra­tion run by Joko, also known as Jokowi, plans to adopt stricter emis­sions stan­dards for new ve­hi­cles in Oc­to­ber next year, the re­finer that sup­plies 90 per cent of the re­tail fuel mar­ket is un­likely to finish up­grad­ing its plants so they can process the cleaner fuel by that time.

That means In­done­sia will need to boost im­ports of so-called Euro IV-com­pli­ant petrol next year, ac­cord­ing to in­dus­try con­sul­tant En­ergy As­pects Ltd and BMI Re­search.

Meet­ing do­mes­tic de­mand for the cleaner petrol through its own pro­duc­tion by next year would be dif­fi­cult for In­done­sia, said Peter Lee, oil and gas an­a­lyst at BMI Re­search in Sin­ga­pore. “This means that a sig­nif­i­cant por­tion of its an­nual petrol con­sump­tion will need to be met through im­ports.”

Asia’s third-most pop­u­lous coun­try is the lat­est among re­gional na­tions in­clud­ing China and In­dia to com­bat air pol­lu­tion. Their ef­forts are send­ing rip­ples across the re­gion’s en­ergy land­scape, with driv­ers re­sis­tant to change strik­ing in the Philip­pines to South Korean re­fin­ers fear­ing com­pe­ti­tion will heat up.

The fi­nan­cial im­pact on PT Per­tam­ina, In­done­sia’s state oil pro­ces­sor, is still un­clear and may rest on its ne­go­ti­a­tions with the gov­ern­ment, which sets do­mes­tic fuel prices.

In­done­sia im­ported 285,000 bar­rels per day of Euro-II petrol last year, said Nevyn Nah, an oil prod­ucts an­a­lyst at En­ergy As­pects in Sin­ga­pore. Over­seas pur­chases would rise to 320,000 bar­rels per day of Euro-IV petrol next year, he said.

Per­tam­ina was still in the mid­dle of up­grad­ing units and wouldn’t be able to sup­ply the high-qual­ity fuel for at least an­other four years, said BMI Re­search’s Lee.

He es­ti­mates that the coun­try’s an­nual petrol con­sump­tion would av­er­age about 670,000 bar­rels a day over the next five years. Oil prod­ucts im­ports had fallen to 23.9 mil­lion tonnes last year from 29.6 mil­lion tonnes in 2013, ac­cord­ing to gov­ern­ment data.

Per­tam­ina aims to com­plete an up­grade of its Ba­lik­pa­pan re­fin­ery in 2019 and its Ci­la­cap re­fin­ery in Cen­tral Java in 2021, af­ter which both re­finer­ies will be able to pro­duce fu­els up to the Euro-V stan­dard.

Un­til then, Per­tam­ina would im­port cleaner petrol, said Gigih Wahyu Irianto, the com­pany’s se­nior vice-pres­i­dent for fuel mar­ket­ing and dis­tri­bu­tion.

The im­pact on Per­tam­ina’s bal­ance sheet re­mains un­clear as the re­fin­ery and gas sta­tion op­er­a­tor is owned by the gov­ern­ment, which reg­u­lates do­mes­tic fuel prices.

If half of In­done­sia’s driv­ers were to buy new Euro-IV com­pli­ant ve­hi­cles next year, it would have to im­port 200,000 bar­rels a day of the petrol, said BMI Re­search’s Lee.

“We’re still study­ing the reg­u­la­tion,” said Daniel Purba, se­nior vice-pres­i­dent at Per­tam­ina’s In­te­grated Sup­ply Chain unit, which han­dles the com­pany’s crude and fuel im­ports.

Still, some are op­ti­mistic In­done­sia’s re­finer­ies can beat their own sched­ules.

Per­tam­ina might speed up its re­fin­ery up­grades to limit fuel im­ports, said Jo­sua Pard­ede, an econ­o­mist at PT Bank Per­mata.

“If Per­tam­ina can’t speed up the re­fin­ery up­grade, the gov­ern­ment will need to im­port such fuel pos­si­bly un­til 2021 or even later through 2025,” said Jo­sua. “That won’t look good on the coun­try’s trade bal­ance.” Bloomberg


Bot­tles of petrol for sale at a street stall in Jakarta. Over­seas pur­chases of the cleaner Euro-IV petrol by In­done­sia may rise to 320,000 bar­rels per day next year.

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