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Govt slashes Pertamina’s oil import quota
The government has ordered state-owned oil company Pertamina to reduce its oil imports this year to dampen Indonesia’s trade deficit, which puts pressure on the rupiah exchange rate
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span>The government has ordered state-owned oil company Pertamina to reduce its oil imports this year to dampen Indonesia’s trade deficit, which puts pressure on the rupiah exchange rate.
An Energy and Mineral Resources Ministry official told reporters in Jakarta on Tuesday that his office had issued a letter that capped Pertamina’s import quota at about 50 million barrels this year. The company initially asked to import about 80 million barrels.
“I limit their import quota to 8,000 barrels per day [bpd] for 2020,” said the ministry’s acting oil and gas director general, Djoko Siswanto. “So they would try to buy local crude oil and continue to negotiate for production that has not yet been bought.”
Djoko made the decision following the issuance of Ministerial Regulation No. 42/2018 that requires Pertamina to prioritize buying crude oil from domestic sources at market prices instead of importing the commodity. The policy is meant to reduce the country’s trade deficit, which reached US$3.20 billion in the last full year.
The oil and gas trade deficit alone was $9.35 billion last year, while non-oil and gas commodities managed to book a surplus of $6.15 billion, Statistics Indonesia (BPS) data showed.
The director general added that out of 200,000 bpd-worth of local crude oil offered to Pertamina last year, the state-owned company only bought 120,000 bpd over that period. The remaining 80,000 bpd remained unsold.
“Right now, Pertamina continues the negotiations and has even reached deals with about 74 percent of the oil and gas companies that have forwarded offers,” said Pertamina spokeswoman Fajriyah Usman in a statement.
Pertamina, she continued, imported about 77.3 million barrels of crude last year and used about 147 million barrels of domestic crude over the same period. The figures are, respectively, 30 percent lower and 1,000 percent higher than the previous year’s, which was when the ministerial regulation was issued.
Commenting on the regulation, ExxonMobil president Louise McKenzie said in December last year that “we will continue discussions with Pertamina. We have business-to-business discussions”.
Texas-based ExxonMobil had commenced in December last year the operation of its Kedung Keris oil field within the Cepu Block in East Java. The field currently produces 5,000 bpd but the American oil company expects
to raise production to 10,000 bpd once it receives administrative clearance.
Under the ministerial regulation, oil buying prices are negotiated on a business-to-business basis. This differs from a recently renewed regulation that requires coal mining companies to sell 25 percent of their production domestically at a maximum of $70 per ton. Coal mining companies have expressed dissatisfaction with the price cap.
Indonesia’s oil production rate was 746,000 bpd last year, while consumption was about 1.8 million, government data shows. The country imports oil to fill the demand gap at the expense of widening the trade deficit.
Aside from implementing the Indonesia-first crude policy, the energy ministry also aims to reduce the deficit by increasing domestic crude oil production, developing new oil refineries and mandating the use of palm oil-mixed biodiesel.
Such policies significantly reduced Indonesia’s oil and gas trade deficit last year, BPS data shows. The deficit went down more than 26 percent year on year to $9.35 billion in 2019.
However, as noted by Energy and Mineral Resources Minister Arifin Tasrif on Jan. 9, “We still use imported substances to support our energy supply.”
