Indonesia Signs Deal to Purchase Iraqi Oil

From Jakarta Globe

Indonesia has become the latest Asian customer for Iraqi oil as it signed a deal with Iraq’s State Oil Marketing Organization (SOMO) to buy Basra Light crude in the second half of 2013, a source familiar with the matter said on Wednesday.

Iraq is winning more customers in Asia as it is selling its crude cheaper than comparable grades, undercutting rival Saudi Arabia to grab a bigger slice of the Asian market.

Petral, the trading unit of Indonesia’s state-run energy firm Pertamina, will lift 1 million barrels of the medium, high sulphur crude each month between June and December, the source said.

SOMO typically sells crude to term customers based on the grade’s official selling price (OSP) every month.

This will add to Petral’s sour crude supply as the company already has an annual contract to buy 1.9 million barrels of Saudi Arab Light crude each month.

Indonesia has received a long-term commitment from the Iraqi government to supply the Southeast Asian nation with crude oil to meet domestic needs, Susilo Siswoutomo, the Indonesian deputy minister for energy and mineral resources, said last month.

In the past couple of years, Indonesia’s reliance on oil imports has increased as domestic output has failed to keep pace with demand. Oil output was 826,000 barrels per day last year, while demand stands at 1.3 million barrels per day.

Indonesia lacks sufficient oil refining capacity to meet its domestic demand. There are six major oil refineries in Indonesia with a combined capacity of 1.1 million barrels per day.

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