Shell to review subsidized fuel distribution offer

Alfian, The Jakarta Post, Jakarta | Mon, 11/02/2009 1:47 PM

PT Shell Indonesia, the local subsidiary of global energy company Royal Dutch Shell, is reviewing a mandate offered by government to distribute subsidized fuels outside its existing distribution network in 2010.

Downstream oil and gas regulator BPHMigas has already chosen Shell to distribute up to 5,110 kilo liters a year, or 14 kilo liters a day of Premium gasoline in Medan, North Sumatra in 2010.

"Our proposal is to distribute the subsidized fuels in areas that include Java and Bali, but BPHMigas has opened up an opportunity outside Java.

"Of course, this will impact on our business plan. Therefore, we are now reviewing this," Shell Indonesia's president director Darwin Silalahi told reporters last Friday.

Darwin said Shell would be in talks with BPHMigas about this and would expect to complete the discussion soon.

Shell currently operates 41 fuel stations and all of them are located in Java.

The appointment may require the company to open new fuel stations in Medan.

"*To be* given a chance outside Java is a good sign for us, but we also want to open up access for customers in all areas," he added.

State oil and gas company PT Pertamina has so far been the sole distributor of the subsidized fuels.

But, for 2010, BPHMigas has appointed three private companies to join Pertamina in distributing the subsidized fuels.

The three companies are: Shell, PT Aneka Kimia Raya Corporindo (AKR), and PT Petronas Niaga Indonesia.

But, the three companies are only allowed to distribute the fuels in limited volume and limited areas, all of which are outside Java and Bali.

AKR has been chosen to distribute up to 109,162 kilo liters a year of diesel, or 299 kilo liters a day, in Medan, Deli Serdang, Binjai, Metro, Central Lampung, East Lampung, South Lampung, North Lampung, Bandar Lampung, Pontianak, and Banjarmasin.

Petronas meanwhile has been chosen to distribute up to 20,440 kilo liters per day of Premium, or 56 kilo liters a day, in Medan.

BPHMigas's chairman Tubagus Haryono said that the three companies were appointed outside Java to help the country to build up subsidized fuels distribution infrastructures in more distant areas.

"We want that the infrastructure not only be concentrated in Java, but also in more distant areas," he said in a text message.

Tubagus added that AKR and Petronas had sent letters saying that they would accept the appointment. BPHMigas is waiting for the same letter from Shell.

"If the letter is not sent, the company will be removed *from the list of distributors*," Tubagus said.

The government subsidizes Premium gasoline, diesel and kerosene.

Under the 2010 state budget bill, the government estimates that subsidized fuel consumption next year will reach 21,454,104 kiloliters for Premium gasoline; 11,250,675 kiloliters for diesel and 3,800,000 kiloliters for kerosene.

For the budget year 2010, Rp 69 trillion ($7.34 billion) has been allocated to fuel subsidies, up from Rp 54.3 trillion this year.

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