JAKARTA: Coal miner Adaro Energy and state-run oil and gas giant Pertamina signed late last week a strategic alliance agreement, that will supply Adaro with nearly 80 percent of its fuel needs for the next seven years and enable Pertamina to use a fuel terminal owned by the publicly listed miner.
The agreement was signed by Adaro president director and CEO Garibaldi Thohir and Pertamina marketing director Ahmad Bambang in Jakarta on Friday, and was a follow up to a memorandum of understanding signed by the companies in May, in which Pertamina agreed to supply up to 800,000 kiloliters of diesel a year to Adaro until 2025.
Friday’s agreement, according to a recently published statement, comprises two aspects, namely a fuel supply agreement and fuel facility agreement.
The supply agreement will see the oil and gas company supply the miner with between 400,000 kiloliters and 550,000 kiloliters per year up to 2022.
Meanwhile, the facility agreement allows Pertamina to rent and utilize a fuel terminal owned by Indonesia Bulk Terminal (IBT), a subsidiary of Adaro. The fuel terminal is located in Kota Baru, South Kalimantan.
The terminal consists of storage tanks and two jetties with a total capacity of 60,000 kiloliters and 1.4 million kiloliters per annum, respectively.
For Adaro, the purchase of fuel from Pertamina — a company with integrated fuel storage and distribution facilities and infrastructure throughout the country — will provide it with supply quality and continuity, the company says in the statement.
The purchase of biodiesel from Pertamina will increase Adaro’s domestic content (TKDN), as required by the government, and in line with the mandatory B15 fuel policy imposed by the government this year.
The government began implementing the mandatory mix of 10 percent of biodiesel in diesel fuel in 2013 as part of its attempts to cut the country’s growing consumption of fossil fuels.
In April, the mandatory portion was increased to 15 percent.
“With the deal, where previously we bought fuel from foreign companies amounting to US$340 million per year, now we will purchase from Pertamina, and the transaction will be done onshore,” Garibaldi said as quoted by Reuters.
The supply deal is expected to supply the bulk of Adaro’s annual fuel demand of an estimated 650,000 kiloliters liters of diesel.
Meanwhile, for Pertamina, the statement said the supply agreement was expected to boost sales and to increase confidence among multinational companies about using its products, thus providing a basis for its business objective of becoming a world-class energy company.
The fuel facility agreement, meanwhile, is aimed at strengthening national fuel supply as it is expected to become a strategic supply hub for marketing Pertamina’s fuel products.
“This agreement is truly a significant milestone where two major national corporations in the energy sector, one state-owned and one private, are starting a highly strategic synergy that will bring benefits to not only the entities, but also the nation, especially for the enhancement of fuel supply for national energy security,” Bambang said in the statement.
Garibaldi said that its fuel storage facility was an important part of his company’s pit-to-power operations, adding that he believed its logistics infrastructure was more than ready to support the initiatives for national energy security, while at the same time securing the fuel supply for Adaro’s operational activities.
