Indonesia`s Pertamina has received a license from the government to export gasoil for the first time, three sources close to the matter said on Monday, although the state oil company is planning to prioritize domestic sales if possible.
Pertamina is typically an importer of gasoil, as diesel is called in most Asian markets, but inbound shipments have declined over the years as it ramped up refining output and demand from the mining sector slowed.
With other gasoil 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 gasoil margins to a one-and-a-half month high, traders said.
The company, though, is also taking steps to sell more gasoil 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 gasoil 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.
Pertamina declined to give details on possible export volumes or a timeline of shipments. LOBBYING FOR IMPORT MONOPOLY
Pertamina supplies about 70 percent of Indonesia`s gasoil needs, while private firms supply the rest, Toharso said.
Many of the private firms import their gasoil, 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 gasoil 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."
"Pertamina has also sent an offer letter to other (retail) companies that need gasoil," Kusdiana said.
But the prices offered by Pertamina are higher than buying from the international market, said a buyer who declined to be named as he was not authorised to speak with media.
"We can easily absorb the cargoes as long as the price is competitive," the buyer said.
Toharso said the prices were negotiable.
Nearly two-thirds of Indonesia`s gasoil is used in its transport sector for commercial vehicles, which is expected to grow at 3 to 5 percent this year. The rest is used in the country`s industrial and mining sectors.
Solaris Prima Energy is a subsidiary of China-owned trader Unipec Singapore, whose parent company is Asia`s top refiner Sinopec Corp.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)