Indonesia cuts refinery runs on lower fuel demand

Indonesia's state-owned Pertamina will cut runs rates at some domestic refineries while other refineries will undergo maintenance in stages, following an unprecedented slump in the country's demand for refined oil products from the Covid-19 pandemic.

"Pertamina will begin to reduce the refineries' operating capacities in stages according to demand conditions," Fajriyah Usman, Pertamina's corporate communication vice president, said.

The 260,000 b/d Balikpapan and 50,000 b/d Sungai Pakning refineries will undergo maintenance, and their crude distillation units will be shut in turns. The 118,000 b/d Plaju refinery will reduce run rates gradually. But the 125,000 b/d Balongan, 348,000 b/d Cilacap and 10,000 b/d Kasim refineries will continue to operate normally.

Pertamina hopes the lower refinery runs will counter burgeoning supplies, which are going into storage. Storage facilities are reaching capacity as the virus outbreak decimates demand for oil products amid restrictions on travel and business activities.

But Indonesia's fuel and LPG stockpiles remain at maximum levels, with jet fuel and diesel stocks at their highest levels for more than 100 days, Usman said.

Domestic demand for gasoline has fallen by about 17pc since March, gasoil demand has fallen by about 8pc and jet fuel by 45pc. Fuel demand in big cities tumbled by more than 50pc, with demand plummeting the most, by nearly 60pc, in Jakarta and Bandung. Fuel demand nationwide declined by 35pc compared to the average in January-February.

Pertamina last week issued rare spot tenders to sell prompt May-loading cargoes of medium and heavy sweet crude grades Banyu Urip and Duri. It also issued tenders to sell Algeria's Saharan Blend, of which it is an equity producer. These grades usually go into the domestic refining system. Pertamina operates all of Indonesia's refineries, which run domestic crude as well as imported light sweet grades.

Pertamina was also in talks last week with suppliers to defer gasoline cargoes for April delivery

Indonesian President Joko Widodo last week called the virus outbreak a non-natural national disaster and granted broader authority to a Covid-19 task force, according to a presidential decree. Indonesia has 6,575 confirmed cases of coronavirus with 582 dead as of 19 April, according to the country's Ministry of Health.

By Yvette Choo

source: Argus Media