JAKARTA (TheInsiderStories) – Ministry of Energy and Mineral Resources (MEMR) and parliament agreed to set Indonesian Crude Price (ICP) 2019 pegged at US$70 a barrel following the dynamics of world oil prices, said one senior official on Tuesday (18/09). This figure higher compared to the 2018 State Budget at $48 a barrel,
“This is what we (the House of Representatives) decided after going through with the marathon discussion,” said chairman of Commission VII Gus Irawan at the working meeting with MEMR officials lead by the minister Ignasius Jonan.
Oil and gas lifting is set at 2,025 thousand barrels of oil equivalent per day, consisting of oil lifting 775 barrels per day (bpd) and natural gas lifting 1,250 million standard cubic feed per day (MMSCFD).
Compared to the 2018 State Budget, the number of assumptions on oil lifting fell by 25 bpd while the gas rose by 50 MMSCFD. Furthermore, the replacement of oil and gas operating costs (cost recovery) is set as much as $10 billion.
Both parties also agreed to lowered the volume of subsidized fuel to 15.11 million kiloliters (KL), divided into kerosene 610,000 KL and diesel 14.50 million KL. While the volume of three kilogram of LPG is set to rise to 6.978 million tons from 2018 only 6.450 million tons.
Fixed subsidies for diesel oil also experienced a change of Rp2,000 per liter from the previous year Rp500 a liter. As for electricity subsidies, it was approved to be Rp57.67 trillion.
If the government did not raise the diesel subsidy, is reported the state-owned energy company PT Pertamina must pay the price gap between subsidy and the real price. The oil and gas holding company on March 2018 calculated a potential loss of Rp3.9 trillion (US$280.58 million) due to selling fuel at below market price.
Previously on Sept. 15, the House of Representatives’ Commission-XI, which is in charge of state budget, has approved the macroeconomic assumptions in the 2019 state budget with economic growth being targeted at 5.3 percent and inflation at 3.5 percent.
The House members and the government also agreed to peg the value of rupiah at Rp14,400 against the US dollar, and the rate of treasury bills at 5.3 percent.
The economic growth target of 5.3 percent in 2019 is lower than 5.4 percent target set in 2018, although the government has stated that the economic growth this year will likely reach only 5.2 percent.
Finance Minister Sri Mulyani Indrawati said during the hearing that the macroeconomic assumptions are realistic. “Despite of the downside risks of import policy, the target of economic growth at 5.3 percent in 2019 is still realistic,” she said.
Admitting that there is potential negative impact from the government’s import control policy, she pointed out that the government will manage the imports in such a way not to negatively impact economic growth while minimizing impact to the increase of current account deficit.
The finance minister said that the government will also try to find the best way of anticipating the change of consumption preferability among the public who tend to save their funds rather than investing to the real sector.
She assured that through is policies the government will also encourage investors to invest as they tend to play save during the political year of 2018 and 2019.
“Other than we’ll keep anticipating the potential global pressures, from the US Federal reserve and current trade wars between the US and China and other countries,” she said.
Other macroeconomic assumptions approved during the hearing are the unemployment rate which is set at 4.8-5.2 percent, poverty rate at 8.5-9.5 percent, economic inequality at 0.38-0.39 percent, and Human Development Index at 71.98.