Official: Indonesia's Pertamina Picks Shell to Process Iraqi Crude

JAKARTA, June 29 (Reuters) – Indonesia's Pertamina has selected Shell to process a million barrels per month of Iraqi crude at a Singapore refinery, a senior official at the state-owned company said on Wednesday.

The quest for oil-processing capacity abroad is partly spurred by a lack of investor interest in building domestic refineries because of unfavourable investment conditions set by the government.

"We've selected Shell because they are the most competitive," said Daniel Purba, senior vice president of Pertamina's Integrated Supply Chain unit.

Purba added that the Shell deal is expected to be formalised in the coming weeks and will initially run for the six months from July to December.

An estimated 900,000 barrels a month of gasoline for import will be produced from the Singapore refinery.

"After that we'll see how it goes; if it runs smoothly and what market conditions are like," Purba said, adding that the arrangement is a far better solution than importing products directly.

Pertamina's monthly Iraqi oil shipments to the Singapore refinery are likely to consist of 290,000 barrels from a stake in the West Qurna block and a further 700,000 barrels from other Iraqi fields.

Pertamina has about 1 million barrels per day (bpd) of domestic refining capacity, which meets only about two thirds of Indonesia's daily oil consumption.

Separately, Purba said that Pertamina is close to finalising a deal to import 1 million barrels of Iranian light crude for delivery in the third quarter from Iran's national oil company.

Purba said Pertamina would initially buy one cargo to test its performance at the Cilacap refinery.

"If it's good, this could be an alternative (source for) crude," he said.

(Writing by Fergus Jensen; Editing by Louise Heavens and David Goodman)