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Note: This report uses an exchange rate of 1 USD = Rp 10,035

Shell Dives into Retail Fuel Market

On November 1, Royal Dutch Shell opened Indonesia’s first privately owned retail fuel station in the Jakarta suburb of Tangerang, breaking state-owned Pertamina's monopoly on retail fuel sales in Indonesia.  Shell will sell its premium 92 and 95 octane gasoline for Rp 5,700 (USD 0.57) and Rp 5,900 (USD 0.59) per liter respectively.  Previously, Shell’s retail presence in Indonesia was limited to the lubricant market.  Shell announced it plans to open its next station in Jakarta and a further 400 outlets throughout the country by 2013.  Apart from Shell, Malaysia’s Petronas and Chevron are reportedly interested in entering the retail fuel market. Shell imports its fuel supplies from Singapore.

Downstream Deregulation Delayed  

President Susilo Bambang Yudhoyono delayed full downstream fuel market deregulation by issuing President Regulation 71/2005 on November 16, which extended Pertamina’s public service obligation (PSO) until December 31, 2005.  The PSO was due to expire on November 23, 2005, but the Government of Indonesia (GOI) extended it because of delays in appointing a qualified entity to continue subsidized fuel distribution. The regulation requires downstream regulatory body BPH MIGAS to select, either through tender or direct appointment, a distribution agent for subsidized fuel.  Pertamina is reported to have requested a direct appointment from BPH MIGAS.  To date BPH MIGAS has yet to announce a tender to carry out subsidized fuel distribution.

Pertamina Offers Discounts to Industrials

In anticipation of new entrants in the retail fuel market, Pertamina began offering discounts ranging between one and four percent to industrial customers willing to sign one-year contracts for a minimum of 100 kiloliters (KL) of fuel per month.  On November 23, Pertamina announced it had signed 35 contracts totaling 356.5 KL per month with customers, including Krakatau Steel and Kaltim Prima Coal.  Analysts say Pertamina hopes to lock in its existing customers and maintain its market share in 2006 when the downstream market is due to be fully deregulated. 

Unsubsidized Fuel Prices Fall As World Markets Ease

Pertamina announced on November 30 that it would reduce prices for unsubsidized fuel delivered to industrial users by an average of 12 percent in December 2005.  Table 1 provides October-December data on prices for five grades of fuel for industrial users. 

Table 1: Industry Fuel Price Trends: October - December 2005

Note: Prices in Rp/liter; decreases by percent from previous month)

Pertamina also lowered retail prices in December for its high-grade, unsubsidized Pertamax Plus and Pertamax fuels from Rp 5,900 (USD 0.59) and Rp 5,700 (USD 0.57) to Rp 5,600 (USD 0.56) and Rp 5,400 (USD 0.54) respectively.  In addition, Pertamina lowered its recently launched premium diesel fuel, Pertamina DEX, from Rp 6,300 (USD 0.63) to Rp 5,900 (USD 0.59).  In announcing the price cuts, Pertamina cited easing world crude prices reflected in a three percent fall in the benchmark Mid Oil Platt Singapore (MOPS) price.  Combined consumption of Pertamax Plus and Pertamax fell to 500 KL per day, compared with the high of 2,000 KL per day in 2004, according to Pertamina statistics.

Pertamina Signs Diesel Factory Deal with Accelon

 Pertamina signed a memorandum of understanding (MOU) on November 23 with Canada’s Accelon Energy Systems to build a high-quality synthetic diesel fuel factory in East Kalimantan.  Reportedly worth at least USD 6 billion, the MOU is the largest Pertamina joint venture contract ever signed.  The factory will use as feedstock 10 million metric tons of low calorie coal from Kalimantan to produce up to 28 million barrels per year of Euro IV standard diesel starting in 2008. Under the MoU, Accelon will provide financing for construction with Pertamina acting as the exclusive buyer of the diesel fuel for 15 years. Pertamina spokesmen said it anticipates saving up to 30 percent on its fuel import costs by buying locally.   

South Sumatra Power Plant Deal

The Chinese consortium Gohuwa and the South Sumatra provincial government-owned PT Petro Muba signed a cooperation contract November 7 to construct a 200 megawatt power plant in Musi Banyuasin regency, South Sumatra.  The deal is reportedly worth USD 200 million. Gohuwa will act as financer and technology supplier to the project and Petro Muba will coordinate land acquisition, licensing and fuel supply.  Project construction is expected to take 3 years.  Musi Banyuasin regent Alex Noerdin also announced a goal of extending electricity from the current 46 percent to 85 percent of households in the regency by next year.  

PLN Announced Pre-qualified Bidders for Cirebon Power

State electricity company PLN announced on November 17 11 successful pre-qualifiers to compete for a contract to construct a 600-megawatt (MW) coal fired generator in Cirebon, West Java.  Seven of the successful bidders are foreign companies, including the Japanese firms Itochu, Mitsubishi and Marubeni, the Malaysian companies YTL Power, Maser Sdn. Bhd, and Intidaya PK-Genting Highland, and Singapore’s AES Transpower Private Ltd.  The GOI shifted the project from Cilegon to Cirebon because Cilegon already had several power plants, including the 3,400 MW Suralaya project. The Cirebon project reportedly will cost approximately USD 600 million and is expected to come online in 2010.  

Darajat III Geothermal Power Plant Inaugurated 

On November 29, Minister of Energy and Mineral Resources, Purnomo Yusgiantoro, inaugurated construction of Darajat III geothermal power project in Garut, West Java. The joint project between Chevron Energy Indonesia and Pertamina has a reported investment value of USD 128 million.  The 110 MW Darajat III is an expansion of the current Darajat complex.  Chevron currently operates the 90 MW Darajat II and supplies steam to the PLN operated 55 MW Darajat I.  Chevron awarded the engineering, procurement and construction contract for the project to a consortium composed of an Indonesian subsidiary of the Australian firm Thiess and Japan’s Kanematsu Corporation.  Darajat III is expected to start operation in the third quarter of 2006 and will sell power to PLN at approximately USD 0.042 per kilowatt hour (kWh).

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