STATE oil and gas company Pertamina has predicted that the country‘s liquefied petroleum gas (LPG) imports this year will soar 91 per cent to 2.009 million metric tonnes from a year earlier.

“In 2010 LPG imports will represent 47 per cent of domestic supplies compared to 34 per cent in 2009,” Pertamina investment planning and risk management director Ferederick Siahaan says at a working meeting with the House of Representatives (DPR) Commission VII.

LPG consumption was projected to reach 4.262 million tonnes in 2010 consisting of subsidised LPG totaling 3.002 million tonnes and non-subsidised LPG totaling 1.261 million tonnes, he says.

The estimate of LPG consumption in 2010 rose compared to 2009 when the figure was 2.884 million tonnes consisting of 1.775 million tonnes of subsidised LPG and 1.11 million tonnes of non-subsidised LPG, he says.

He says 957 thousand tonnes or 22 per cent of domestic LPG supplies this year would come from Pertamina‘s refineries, 47 thousand tonnes or 1 per cent from Pertamina‘s upstream business division, 1.182 million tonnes or 28 per cent from contractors of cooperation contract (KKKS) and 73.9 thousand tonnes or 2 per cent from privately-run refineries.

In 2009 LPG imports accounted for 34 per cent or 1.052 million tonnes of domestic supplies, while Pertamina‘s refineries contributed 770.7 thousand tonnes or 25 per cent, Pertamina‘s upstream business division 51 thousand tonnes or 2 per cent, contractors of cooperation contract 1.151 million tonnes or 37 per cent and privately-run refineries 61.9 thousand tonnes or 2 per cent, he says.

2011 SUBSIDISED LPG CONSUMPTION

Meanwhile, according to Pertamina’s estimates, the consumption of subsidised liquefied petroleum gas (LPG) will increase to around 3.5 million tonnes next year from 3.0 million tonnes this year, a company official said.

Indonesia has gradually replaced kerosene used by households with LPG from late 2007, to reduce the country’s high cost of subsidised fuel.

“Pertamina will expand the use of subsidised LPG to several areas outside Java island. This will add to consumption,” Hanung Budya, Pertamina’s deputy director says.

Another Pertamina official, who declined to be identified, says the company will import more LPG next year because domestic consumption was growing.

Pertamina will import about 2.4 million tonnes of LPG this year, up from about 1.15 million tonnes in 2009.

An official at the energy watchdog BPMIGAS said the Bontang liquefied natural gas (LNG) plant will provide more LPG for domestic use next year. But he gave no details. Pertamina also sells non-subsidised LPG in the domestic market, used by middle class households and by industries.

LOSSES FROM SUBSIDISED FUEL

Meanwhile, Pertamina reported losses of Rp 187 billion from the distribution of subsidised fuels and subsidised liquefied petroleum gas (LPG) in the first three months of 2010, the company’s executive says.

“As of March this year, we suffered losses of as high as Rp 554 billion from the distribution of subsidised fuels. As for subsidised LPG, we booked a profit Rp 386 billion. Thus, in total, we suffered a loss of Rp 187 billion in the subsidised business,” Pertamina’s investment planning and risk management director Ferederick ST Siahaan says. Earlier, the company reported that it estimated it would lose of Rp 2.5 trillion from the distribution of non-subsidised LPG this year.

PERTAMINA SUFFER LOSSES

Pertamina may lose Rp 2.55 trillion ($275.4 million) from non-subsidised liquefied petroleum gas (LPG) sales in 2010 because sales prices remain below market value, says an official.

State oil and gas firm Pertamina sells non-subsidised LPG for Rp 4,912 per kg, while the fuel’s commercial price is currently Rp 7,679.91 per kg, said the company’s investment planning and risk management director Ferederick ST Siahaan.

“Pertamina must cover the price gap of Rp 2.767.91 per kg,” Ferederick told legislators. Pertamina sells subsidised LPG in a 3-kg canister and three types of non-subsidised LPG: 12-kg canister LPG, 50-kg canister LPG, and bulk LPG.

The company previously submitted a proposal to raise the price of non-subsidised LPG by Rp 1,000 per kg starting in June. However, the state-owned enterprises ministry is still evaluating the proposal.

Even if the ministry approves Pertamina’s proposed price increase on 2010, the company’s non-subsidised LPG business will suffer a loss, Ferederick says.

“The proposed price increase of Rp 1,000 per kg will (only) reduce the 2010 loss estimate by Rp 655 billion, to Rp 2.55 trillion,” he says.

Pertamina is suffering losses because it must import some LPG to meet local demand, Ferederick adds. “Even though some LPG is purchased from domestic buyers, we must buy it at the market price,” he says.

In 2010, Pertamina accumulated almost 4.27 million tonnes of LPG, 51 per cent from Pertamina’s own production, 47 per cent from imports and 2 per cent from other domestic producers. Some traders have profited from an increase in the market sale price of 12-kg canister LPG, Ferederick adds.

Pertamina’s official price for the 12-kg canister LPG is Rp 70,200 per canister, but is sold for Rp 75,000 to Rp 80,000 per kg, he says.

State-owned enterprises ministry secretary Said Didu says Pertamina would subsidise rich people and other companies, including foreign companies, unless the price of non-subsidised LPG was increased.

“It’s illogical for a state-owned company to subsidise for other companies,” he says. Pertamina does not need ministry approval to raise non-subsidised LPG prices, he adds.

“This is within the company’s domain. The company’s board of directors can simply execute such a policy,” he says.

SUBSIDISED FUEL CONSUMPTION

Pertamina estimates that the country’s subsidised fuel consumption will rise 6 per cent to 42.5 million kiloliters in 2011 from 40.1 million kl projected for 2010, a senior official who declined to be named says, adding that the rise will boost the country’s imports for these oil products.

Pertamina’s figures are only estimates as the subsidised fuel quotas require government approval, the official says.

For 2010, the government has so far pegged its fuel subsidy allocation at just 36.5 million kl compared with Pertamina’s estimate of 40.1 million kl for the year.

Indonesia’s downstream regulator BPH Migas also expects realisation of the subsidized fuel for 2010 to be 40.1 million kl, 10 per cent above the government’s allocation.

BPH Migas estimates that consumption of subsidised 88 RON gasoline may climb by 8.2 per cent to 23.2 million kl this year from the original quota of 21.45 million kl. Diesel oil consumption may reach 13.1 million kl this year compared with the original target of 11.25 million kl while the quota for kerosene is expected to remain at its original target of 3.8 million kl, Haryono says.

Indonesia in 2009 had consumed 21.2 million kl of gasoline, 12.1 million kl of gasoil and 4.6 million kl of kerosene, chairman of BPH Migas Tubagus Haryono says.

The government has been gradually replacing subsidised-kerosene with LPG for use in the household sector across the country. The program which started in 2007 is expected to be completed by 2010, and has been effective in reducing the use of kerosene in the country.

Pertamina currently operates seven refineries with a total capacity of 1.05 mbpd. However, this is only enough to supply 70 per cent of domestic demand for petroleum products, with the balance having to be imported.