Pertamina and TWU Agree on Cepu Crude Oil Price

Pertamina EP Cepu (PEPC) plans to start delivering crude oil from the Banyu Urip Field in the Cepu Block to Tri Wahana Universal (TWU) refineries next month.

PEPC President Director Adriansyah said TWU and Pertamina have come to an agreement on the crude oil price. They used the Energy Ministry’s price formula, which is based on the selling price at the Gagak Rimang floating production, storage and offloading (FPSO) facility or the Arjuna Indonesian Crude Price (ICP) minus US$0.5 per barrel. (Read: Pertamina Wants Fair Price to Sell Cepu Oil to TWU)

Pertamina EP Cepu will deliver 6,000 barrels per day (bpd) of oil to the refinery owned by TWU, a subsidiary of Saratoga Group. “I expect to be able to do that early August,” he told Katadata on Thursday (28/7).

However, Adriansyah added that the price may change, especially if a new regulation on the sale of Cepu crude oil to the TWU refinery is introduced. The price would then be revised. The EMR Ministry is also preparing a regulation on mini refineries that includes crude oil prices.

The ministry’s Director of Downstream Business Development Setyo Rini Tri Hutami said the regulation on mini refineries sets the maximum capacity of a mini refinery at 20,000 bpd. Another provision states that a refinery can be built in a location proposed by the Special Task Force for Upstream Oil and Gas Business (SKK Migas) or in another location deemed suitable by survey of the company that intends to build the mini refinery.

The ministry will also allow state-owned enterprises (SOE), regionally-owned enterprises (BUMD) and private entities to build mini refineries. “If the government wants to build one, it can assign Pertamina to do so,” he said to Katadata last week.

The regulation is still in the hands of the Ministry of Law and Human Rights. When finalised, it will be immediately introduced. (Read: Reactivation of TWU Refinery in Cepu Block AwaitingLegal Ruling)

The TWU refinery stopped operating in January because the oil sales agreement had ended and could not be renewed because the government was still reviewing the right oil price formula.

Before its contract ended, TWU enjoyed lower prices because Cepu oil could not be sold to other buyers because the block’s FPSO facility was still under construction. Once the development of the FPSO is complete, the new contract price should be different.

This pricing issue also caught the attention of the Supreme Audit Agency (BPK). According to information obtained by Katadata,the BPK’s preliminary audit findings showed the state stood to lose US$3.6 million, or some IDR 47 billion, from the sale of Cepu crude to TWU in the period April to December 2015.

The cause of this potential loss was the government setting the selling price below the Indonesian Crude Price.

However, the BPK recently announced that the state suffered no loss from the sale Cepu oil to the TWU refinery. The BPK even recommended the government sell oil at a lower price to support the development of mini refineries. “No, there was no state loss. There was just a potential loss of revenue,” BPK official Achsanul Qosasi said on 31 May 2016. (Read: BPK Says State Suffered No Loss from Cepu Oil Sales)