Indonesia hires tankers to store fuel at sea while seeking bargains

New York

INDONESIA is hiring tankers to store refined fuels at sea as it seeks to take advantage of plunging prices of oil products such as petrol and diesel.

State-owned PT Pertamina has provisionally chartered at least three long-range tankers to store clean fuels, said people with knowledge of the matter. The move comes as Indonesia, one of Asia's biggest refined fuel importers, weighs the merits of processing its own crude or buying fuels from abroad, which is becoming more cost-effective amid a glut.

Vessels were booked from the end of April and early May for a minimum of six months with an added option for use as floating storage near Singapore or Malaysia's Sungai Linggi, said the people who asked not to be identified as the information is not public. Earlier, the company had been negotiating with its suppliers to defer April-arriving cargoes as demand crashed.

"Pertamina appears to have switched to a new strategy, rather quickly, and is now taking advantage of the low-price environment to stock up on products instead of producing them," said Grayson Lim, a senior oil market analyst at FGE, an energy consultancy firm. The demand loss for oil products in Indonesia will average 430,000 barrels a day this quarter due to the coronavirus, it estimated.

Oil and fuel storage capacity is being stretched worldwide as the coronavirus drives down consumption, and tanks fill up in major hubs such as Cushing in the US, Singapore and South Africa's Saldanha Bay. Indonesia and Australia are among the biggest importers of refined fuels in Asia with North-east Asian nations having enough processing capacity to meet their domestic needs.

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Pertamina plans to add external storage when its internal capacity fills up, but does not yet know how many ships it will need, spokesperson Fajriyah Usman said in a text message. The company has also started early maintenance at its Sungai Pakning and Balikpapan refineries and will gradually reduce operations at Plaju refinery, she said.

It will slash the volume of crude it processes by 43 per cent in May, president-director Nicke Widyawati told Indonesian lawmakers on Tuesday. The company plans to use storage owned by the government as it seeks to import more oil, and has fuel reserves that can last 35-91 days, Mr Widyawati said.

The oil and gas company chartered SCF Prudencia, BW Zambesi and Nordvenus, according to shipbrokers and data compiled by Bloomberg. The vessels have a capacity of 500,000 barrels each. Pertamina, which manages Indonesia's fuel imports as well as exports of crude from the country's oil fields, has also sought a ship to store crude oil on a long-term time chartered basis.

It is looking for an Aframax tanker with capacity of about 650,000 barrels for floating storage with ship-to-ship transfer capabilities, according to a tender document seen by Bloomberg. Delivery of the tanker, which can carry crude oil or fuel oil, is from May 20 to May 30, with the tender closing April 20.

Meanwhile, Pertamina has also issued rare offers for local crude grades such as Duri as well as Algeria's Saharan Blend, which the company imports via long-term contracts. BLOOMBERG