Indonesia is hoping that the upcoming visit of Saudi Arabia’s King Salman Abdulaziz Al Saud will pave the way for it to enjoy the lower price option offered by the energy-rich country for its crude oil.
The Energy and Mineral Resources Ministry’s spokesman, Sujatmiko, said that the ministry would ask the Saudi delegates to put Indonesia on a list of nations that could enjoy the so-called “preferential prices” by importing a large volume of Saudi oil. “The energy and mineral resources minister will request that Indonesia be included among countries that can buy [Saudi] crude oil at a preferential price,” he told reporters recently “We are not on this list yet. However, the preferential price will definitely be different to the normal price.”
Data from the Geneva-based International Trade Center shows that Indonesia imported crude oil worth US$52.06 billion, a quarter of the total imported value that year, from Saudi Arabia, making it the largest crude oil supplier to the country King Salman and his entcurage are scheduled to visit Indonesia from March 1-9.
Sujatmiko said the government hoped that by making an initial government-to-government deal, it would be much easier for state-owned oil and gas firm Pertamina to conduct further negotiations with related parties. Although Indonesia has long been touted as a fossil-fuel rich country, ageing wells and a lack of new discoveries have forced the country to import crude oil and refined fuels in order to meet the vastly growing national demand.
While Indonesia’s national refined fuel demand amounts to around 1.6 million barrels of oil per day (bopd), official data show that last year’s ready-to-sell oil production, locally known as lifting, barely surpassed its target of 820,000 bopd, only 500,000 bopd of which is processed domestically. As a result, Pertamina has had to import around 40 percent of national crude demand, or around 350,000 bopd.
The Volume of imports is also expected to skyrocket as Pertamina is working on a project to upgrade existing, and construct new, oil refineries With a targeted production capacity of more than 2 million bopd within the next decade. Indonesia’s energy sector has a long history of upward and downward trends. An increase in exploration activity at the beginning of the New Order government resulted in the discovery of new oil reserves and increased oil production from about 600,000 bopd in 1967 to 1.7 million in 1977.
After reaching its peak in the 1970s, upstream oil and gas activity in Indonesia has continued to decline as a result of ageing fields, which are expected to experience a natural decline in production of around 20 percent. Apart from getting on the list of countries buying crude at a preferential price, the government will also ask the Saudi General Authority of Civil Aviation (GACA) to allow Pertamina to partner with local firm Dallah Trans Arabia to supply jet fuel at the King Abdulaziz International Airport in Jeddah.
Meanwhile, Pertamina processing and petrochemical mega-project director Rachmad Hardadi said there was a possibility that the two parties might discuss the possibility of Saudi Arabia helping Indonesia to develop its strategic petroleum reserve. Separately Refor Miner Institute researcher Pri Agung Rakhmanto said it was essential that Indonesia get on the list of preferential nations as the country was in dire need of alternative crude oil supplies.
“It is very important to attempt to get a priority in crude supplies with cheaper prices in comparison to the spot price,” he said. “If we manage to seal a deal from a government-to-goverm ment standpoint, then it would be much easier to conduct negotiations on abusiness level and compose a contract.”
Jakarta Post, Page-13, Monday, Feb, 27, 2017
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