960404

Indonesia seeks

oil products

outside Singapore

SINGAPORE: Indonesia is seeking to stabilise its supplies of diesel and jet fuel by diversifying away from Singapore, a source with the state oil firm Pertamina said on Thursday.

Indonesia is a major buyer of these oil products and the diversification would help limit its exposure to sudden price hikes when domestic demand rises, the source said.

"Our affiliates need to have a more permanent understanding with suppliers and not be too dependent on supplies from Singapore," the source told Reuters.

"If we don't have an understanding with major suppliers outside Singapore and our demand increases from time to time, we will have to pay high prices for limited stocks," he said.

Traditonally, Indonesia has sourced its diesel and jet purchases from Singapore-based refineries.

But the source said over the past few months Pertamina's purchasing affiliates, Indoil and Perta Oil Marketing, have been increasingly buying diesel sourced from Saudi Arabian refineries Rabigh and Jubail via traders and major oil firms. They bought two 110,000-barrel cargoes of jet fuel each in February and March from the Kertih refinery in Trengganu on the Malaysian east coast through Malaysia's state oil trading arm Petco, he said.

The affiliates find it more economical to buy cargos from the Middle East, even if freight costs are factored in, compared with buying from Singapore.

But Singapore traders said profit margins on Middle East cargoes might not always work because prices there were volatile and high freight costs could outstrip any price advantage. Singapore would remain an important supply base for Indonesia, they said.

Traders said Indonesia has been a discreet buyer over over the past few months and little was known about its purchases. The Pertamina source said by diversifying sources, it sought to calm the markets and avoid prices from escalating when it is known that Indonesia is out to buy.

He said Indonesia's buying strategy has caused prices to rise strongly in the past. Its monthly demand could only be determined two to four weeks in advance but buyers like India, Taiwan and Sri Lanka tend to issue tenders one or two months in advance.

The fire contributed to rally in diesel prices to a five-year high of $28.35 a barrel by February 23 and $33.85 for jet fuel by January 9.

The source said, it is even more important now for Indonesia to seek reliable suppliers away from Singapore as its oil products imports would rise in fiscal 1996/1997 (April/March).-Reuter