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Govt wants exported crude oil to go to domestic refineries instead
The move to redirect some crude oil initially allocated for export may increase the oil and gas trade deficit, experts warn, urging the government to diversify the downstream oil and gas industry in order to offset potential revenue losses from reduced exports.
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The Pertamina Hulu Energi (PHE) Offshore North West Java (ONWJ) oil and gas rig is pictured on April 2, 2023, in waters off Indramayu, West Java. (Antara/Aditya Pradana Putra)
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he government’s decision to redirect some crude oil initially allocated for export may worsen the oil and gas trade deficit, experts warn, urging the government to diversify revenues from the downstream oil and gas industry to offset potential losses from reduced exports.
Energy and Mineral Resources Minister Bahlil Lahadalia said on Monday that the government was mulling over a plan to divert all crude oil pegged for export to be processed by domestic refineries instead, as part of a larger effort to achieve energy self-sufficiency.
The minister estimated that 12 million to 13 million barrels of crude oil, or around 46 percent of the 28 million allotted for export this year, could be redirected for domestic processing.
Bank Permata chief economist Josua Pardede said curbing crude oil exports could exacerbate the oil and gas trade deficit if domestic refineries were not ready to fully absorb the redirected oil, especially considering that the country already suffered from a deficit in its oil and gas trade balance because of high volumes of fuel imports.
“Indonesia’s crude oil exports provide a significant contribution to foreign exchange [earnings], especially when world oil prices are elevated. So, diverting exported crude oil to domestic processing is bound to reduce revenues from exports,” he told The Jakarta Post on Tuesday.
Josua suggested that the government simultaneously formulate a strategy to diversify revenues from the downstream oil and gas industry to replace the potential losses in foreign exchange earnings from crude oil exports.
Indonesia exported oil and gas products valued at US$1.53 billion in December last year, comprised of crude oil, refined oil products and natural gas worth $231 million, $468.5 million and $839.9 million, respectively.
