Dumai Refinery - Photo by Pertamina)

JAKARTA (TheInsiderStories) – The government has taken a new strategic step to improve the oil and gas trade balance, which continues to be a deficit so far. Taking PT Pertamina‘ investment abroad as primary income in the balance of payments is the only policy improvement that has the potential to benefit Indonesia, said a senior minister on Wednesday (05/22).

“Actually, our oil and gas deficit is not too wide. People need to know that the results of oil exploration conducted by Pertamina abroad and brought into the country are recorded as imported goods,” said Coordinating Minister for Economic Affairs Darmin Nasution in Jakarta.

According to him, with this note, there was a widening of Indonesia’s trade balance transactions so far. With the new policy mix, he said, the government stipulates that it still records the import of crude oil from Pertamina‘ overseas investment in the Trade Balance.

The recording, said Nasution, is in accordance with the standards of the International Merchandise Trade Statistics and the standard of the Balance of Payment Manual International Monetary Fund.

In addition, according to the policy of the Energy and Mineral Resources ministry as of May 2019, the utilization of domestic crude oil which is usually exported is still processed domestically for the domestic market.

Meanwhile, crude oil from the exploration of parts of the Cooperation Contractors in the country which have been exported, some of which are processed at Pertamina’s domestic refineries.

“This will reduce the import of crude oil that Pertamina needs to produce fuel, such as diesel fuel and aviation turbine (avtur),” he said.

The minister stressed that, if the new policy is carried out tactically, the trade balance, especially the current account deficit (CAD), can be anticipated and reduced.

“We hope that with this policy, the oil and gas trade balance deficit will be reduced in the near future,” he said.

Statistics Indonesia reported that CAD deficit in first quarter (Q1) of 2019 was recorded at US$6.96 billion, equivalent to 2.6 percent of Gross Domestic Product. The deficit figure is much deeper than Q1 2018 which amounted to $5.19 billion or 2.01 percent of GDP.

Meanwhile, the trade deficit in Q1 2019 also experienced a widening of $193.4 million compared to the surplus position of $314.4 million in Q1 2018.

It said, exports during Q1 2019 were recorded at only $ 40.52 billion, down compared to $44.27 in Q1 2018. Meanwhile, imports also declined 7.39 percent to $40.70 billion compared to $ 43.95 billion in Q1 2018.

This deficit was contributed by the oil and gas sector which amounted to $1.34 billion in Q1 2019, which consisted of the value of crude oil which experienced a deficit of $811 million and oil yields which were a deficit of $2.86 billion.

Conversely, the gas value experienced a surplus of $2.33 billion.

Written by Daniel Deha, Email: daniel@theinsiderstories.com