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Jakarta Post

Bid for cleaner fuel blocked by Pertamina

  • Hans Nicholas Jong

    The Jakarta Post

Jakarta   /   Sat, August 22, 2015   /  04:37 pm

Indonesia'€™s effort to move away from cheap and dirty gasoline to higher-grade fuel has been blocked by state-owned oil and gas firm Pertamina, which was reluctant to import cleaner gasoline, arguing that the move will create an extra burden on the country'€™s already declining economy.

The Environment and Forestry Ministry, which has the authority to issue a ministerial decree forcing the industry to adopt a higher standard on emission levels from motor vehicles, said that it had already written a draft of the necessary regulation.

'€œWe already tried drafting a ministerial decree for Euro IV. The problem that we face is the availability of [clean] fuel,'€ the ministry'€™s environmental pollution and damage control director general, MR Karliansyah, said during a conference on air pollution held by the University of Indonesia (UI) in Jakarta.

He was referring to Euro IV, an international standard on emission levels from motor vehicles that required automobiles to use diesel fuel with a sulphur content no higher than 50 parts per million (ppm).

ASEAN countries are aiming to move the region to Euro IV in both gasoline and diesel by 2016 and Euro VI by 2020.

Yet, Indonesia as of now is still adopting the Euro II standard, which requires a maximum ppm of 500, while other ASEAN countries have moved toward cleaner fuel.

'€œIn ASEAN, the Euro IV standard is supposed to take effect by 2016, but we'€™re the only one left behind. Pertamina said that if we rely on our domestic production, we will have to wait another five years. So I asked them to just import Euro IV fuel, but they say there will be a difference in prices,'€ Kaliansyah said.

Pertamina marketing director Ahmad Bambang said an upgrade to Euro IV would be very costly, as the country would have to rely on imports in order to meet the demand for the fuel.

'€œIf the standard is applied and we have not been able to meet the demand [from our production], then we will have to import. The problem is whether in the current economic situation, the people and the industry are ready for the extra burden of higher operational costs because the prices [for cleaner fuel] are higher,'€ he told The Jakarta Post on Friday.

When asked further about the increase in import costs, Bambang said that Pertamina had not calculated the expense of importing cleaner fuel. Pertamina recently had to raise the prices of its non-subsidized fuels to cope with higher import costs caused by the depreciation of the local currency.

'€œWe haven'€™t calculated it yet because it'€™s not mandatory yet [to import Euro IV fuel]. Just look at the difference between the prices of 1,000 ppm fuel with 3,500 diesel fuel using the Mid Oil Platts Singapore [MOPS] calculations,'€ he said.

According to calculations from the Committee for the Phasing Out of Leaded Fuel (KPBB), however, the difference in prices is insignificant and the benefits of phasing out dirty gasoline will far outweigh the drawbacks.

'€œThe fact is that 5,000 ppm diesel fuel could still be imported despite a price gap of only US$2 per barrel [for cleaner fuel of 50 ppm]; $2 divided by 160 liters is very small. Probably it amounts to a Rp 200 to 300 difference in price per liter,'€ KPBB executive director Ahmad Safrudin said on Friday.

Moreover, Indonesia'€™s oil imports did not go far beyond what was predicted, amounting to 50 percent of the country'€™s total demand of 1.6 million barrels per day.

The reform team for the oil and gas sector has also recommended Pertamina stop importing dirty gasoline since was was hard to find in the market and is no longer used by other countries, which will increase Pertamina'€™s procurement and blending costs.

Since the KPBB deemed adopting cleaner fuel to be economically viable, Safrudin said that the decision to stick to cheap and dirty gasoline was driven by the auto industry and the oil '€œmafia'€.

'€œThe auto manufacturers who are not ready [with the phasing out of dirty fuel] lobbied their way through the Association of Indonesian Automotive Manufacturers [Gaikindo]. Finally, they agreed to take a stance of not adopting Euro IV by 2016 in secret. In public, they say they agree to it, but behind closed doors, they'€™re not,'€ he said.

Pertamina corporate communications vice president Wianda Pusponegoro denied the accusation, saying that the auto industry was actually very open to the idea of adopting higher fuel standards, shown by their positive response toward the company'€™s new RON 90 fuel product called Petralite, which is cleaner than Premium.

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