Energy and Mineral Resources Minister Ignasius Jonan briefs the press on revocation of regulations - Photo by MEMR

JAKARTA (TheInsiderStories) – Indonesia government continues to strive to increase domestic foreign exchange reserves by requiring all export proceeds to put their revenues in the local bank in order to maintain current account deficit (CAD), said government official last week.

According to Director General of Mineral and Coal, Ministry of Energy and Mineral Resources (MEMR) Bambang Gatot Ariyono, the government has issued Ministerial Decree Number 1952/K/84/MEM/2018 which requires mineral and coal entrepreneurs to deposit all export proceeds to the Domestic Bank or State-Owned Bank abroad.

He explained that the exporters are also obliged to report their export transactions to the government every month. This step, Ariyono said, was intended to monitor whether the entrepreneurs had deposited their export proceeds to domestic banks.

Furthermore he stated, that if these entrepreneurs did not comply with the rules in a certain period of time, the government would not hesitate to give a sanction. The first sanction is a reprimand, the next sanction may be that the Work Plan and State Budget proposed by the entrepreneur in the following year will be reduced. If, the two sanctions do not deter entrepreneurs from following the rules, the government will revoke its export license.

Beside mining, last August, Indonesian President Joko Widodo has instructed the state-owned energy producer PT Pertamina to buy all domestic oil production at market prices. Pertamina currently only instructed to buy the government’s share, while the contractors export its oil.

According to Oil and Gas Director for EMR ministry Djoko Siswanto, the minister Ignasius Jonan has signed the ministerial decree and now awaiting final approval by Law and Human Rights ministry.

This day, Indonesia produces around 800,000 barrel oil per day (BOPD) divided to the government’s share and oil & gas contractors’ share according to the production sharing contracts (PSC). Jonan said on August 15/08, that oil & gas contractors currently export around 300,000 BOPD, while Pertamina imports around 400,000 BOPD.

This policy will reduce imported oil that brings significant pressure to trade deficit. Surprise trade deficit US$2 billion in July driven by oil & gas deficit at $1.19 billion pushed by$81.2million in oil import.

Pertamina’s President Director Nicke Widyawati admitted the company could reduce crude oil imports by 200,000 BOPD by purchasing contractors’ oil share. She said, that Pertamina would join oil purchase auction and ask for the first right to match.

According to the Upstream Oil and Gas Regulatory Special Task Force data, Exxon Mobil Cepu Limited is the biggest oil producer in Indonesia with a production of 209,922 barrel oil per day in the first semester of this year.

It followed by Chevron Pacific Indonesia (207,148 BOPD), Pertamina EP (70,031 BOPD), Pertamina Hulu Mahakam (46,376 BOPD), CNOOC (30,876 BOPD), Pertamina Hulu Energi ONWJ (30,489 BOPD), Petronas Carigali (Ketapang) Ltd (15,698 BOPD), Chevron Indonesia Company (14,410 BOPD), and PetroChina International Jabung Ltd (14,302 BOPD).

EMR ministry itself now sets a strategic policy from the rearrangement electricity projects, application of mandatory B20, increase the Domestic Component Level, up to a policy export proceeds natural resources for strengthening the Rupiah, said Jonan on Tuesday (04/09).

For that, Jonan revealed that the ministry will establish the norm of that all exports must use letters of credits. In addition, 100 percent export products also have to go back to Indonesia, either in US dollars or placed on the Indonesian banks abroad.

“If the money from these exports are not returned, the company can be penalized to reduce its exports,” urged by Jonan.

Director General of Minerals and Coal Bambang Gatot Aryono added, that his office will conduct monitoring by requesting reports every month from the company to evaluate whether they meets the requirements or not.

While in the electricity sector, Jonan explained that from the power plant construction program of 35,000 megawatts (MW) is planned, which have not yet reached financial close and had shifted amounts to 15,200 MW.

“So be shifted according to the needs of the national electricity demand, but not canceled. It should Commercial Operation Date in 2019 was postponed to 2021 until 2026. It was possible to reduce the burden of imported around approximately US$10 billion,” said Jonan.

He ensured that this shift does not diminish the government’s target to achieve electrification ratio of 99 percent in 2019.

While related to the implementation of fuel with a mixture of 20 percent biodiesel (B20) which came into force on Sept. 1, he continued, the government will carry out surveillance in earnest and accommodate what could be improved from time to time. The goal to save foreign exchange costs around $2.3 billion in four months.

Next year, the total might be able to save more than $3.3 billion, said Jonan. This includes also diesel operated by state-owned energy firm PT Perusahaan Listrik Negara (PLN). He added, “We were also asked to PLN, for the diesel which is already low operational capacity, it can be replaced with 100 percent palm oil in two years.”