Saudi Arabia give a surprised a crude oil production cut by 1 million barrels a day starting this month but uncertainty over the outcome of the Georgia election run-offs - Photo by Pertamina Office

JAKARTA (TheInsiderStories)– Indonesian state oil company, PT Pertamina has agreed to purchase 116.9 million barrels oil per day (MBOPD) from 37 production sharing contract (PSC) operating in the country. Last year, the oil and gas has abosorb 12.8 MBOPD.

Pertamina’ spokeswoman Fajriyah Usman, explained with the purchase of domestic crude oil, it can increase Indonesia’s energy sovereignty.

“By taking domestic crude oil will supports our efforts to secure the raw materials supply for Pertamina refineries,” said Pertamina’ spokeswoman Fajriyah Usman in an official statement on Tuesday (07/02).

He added, Pertamina would continue to expand cooperation based on agreements with each contractors cooperation contract. With the increasing absorption of crude oil and condensate domestic, it will have an impact for reducing crude oil imports.

Now, Pertamina has no longer imported heavy and super heavy crude oil and only imports light and medium crude types.

Is known, according to Energy and Mineral Resources Minister Regulation No. 42 of 2018 concerning the Priority of Petroleum Utilization to Fulfill Domestic Needs, Pertamina and Business Entity Holders of Petroleum Processing Business Licenses must prioritize for domestic oil supplies.

Likewise, the Contractor or its Affiliates are required to offer the Contractor’s petroleum portion to PT Pertamina or the Business Entity of the Petroleum Processing Business License.

“Pertamina expresses appreciation to all contractors cooperation contracts that have been cooperating so far and hope that cooperation can continue to be improved in the future,” said Usman.

Previously, PT Pertamina was reduced the crude oil and condensate imports by around 50 percent in the first-four months of 2019, said the company yesterday (05/02). The oil and gas producer succed to lowered the import costs worth of US$1.4 billion.

The spokeswoman Fajriyah Usman, said in an official statement, the declined was mainly influenced by the absorption of crude oil and domestic production of condensate from the part of the contractors based in the country.

She explained, the volume of imports of crude oil and condensate in the period January to April 2019 around 25 million barrels or dropped dramatically compared to the same period in 2018 which was 48 million barrels.

“The declining is very significant because a portion of the demand for crude oil for Pertamina refineries already be fulfilled from within the country,” said Usman.

Until the third week of April 2019, she added, Pertamina has made an agreement to purchase 137,000 barrels per day of oil (bpd) and condensate domestically from 32 contractors. The most influential domestic purchases of domestic oil and condensate are parts of former PT Chevron Pacific Indonesia for Duri and SLC types, which amount to 2-3 million barrels per month.

“With this supply, Pertamina currently does not import heavy and super heavy crude oil and only imports light and medium crude,” she said.

As known, the government issued Energy and Mineral Resources Ministerial Regulation Number 42 Year 2018 concerning the Priority of Petroleum Utilization to Fulfill Domestic Needs, in which Pertamina and Business Entity Holders of Petroleum Processing Business Permits must prioritize domestic oil supplies.

Meanwhile, contractors or affiliates are required to offer petroleum parts to Pertamina or the Business Entity of Petroleum Processing Business License Holders.

With the existence of this policy, Pertamina can help reduce the domestic imports, so as to have an impact on strengthening the country’s foreign exchange reserves.

The decline in oil imports is in line with Pertamina’ previous commitment to reduce the amount of oil and gas imports in a way that is more utilizing domestic oil production. This is in simultaneously with President Joko Widodo’ policy to regulate the use of non-subsidized B-20 biodiesel (Public Service Obligation) on Sept. 1, 2018.

Therefore, Pertamina has taken strategic steps, including maximizing the B20 program or a 20 percent mix of biodiesel use.

Then, Pertamina will also convert refineries that are already available to produce green fuel, the refinery is the Plaju and Balongan Refinery. Furthermore, from LPG consumers who continue to increase, the producer takes the initiative to use coal gas or gasification from coal which is able to reduce LPG imports by up to 70 percent.

Furthermore, coal gas can produce dimethyl ether (DME) which can reduce the use of LPG consumption.

Considering last year’ current account deficit, this Pertamina policy should be appreciated. Because the trade balance deficit can be stopped if the government seriously fixes policies that have hindered investment and trade, including the magnitude of imports that continue to soar each year.

In 2018, the trade deficit reached $8.57 billion, the biggest deficit in the trade balance in history. In fact, for three consecutive years, 2015 to 2017, Indonesia’s trade balance was a surplus, each at $7.7 billion, $9.5 billion, and $11.8 billion.

Meanwhile, the current account deficit in 2018 can penetrate $30 billion or 3.5 percent of GDP. Besides, the 2018 oil and gas trade balance deficit reached $12.4 billion.

The large oil and gas trade balance deficit wiped out the non-oil and gas trade balance surplus, which in the same period reached $3.8 billion. The main reason for the oil and gas deficit to swell is import fuel. In 2018, crude oil and fuel imports reached $29.8 billion, up from $24.3 billion in 2017.

In addition, to boost the domestic electricity supply, PT Pertamina Power Indonesia, its unit, has collaborated with PT Perkebunan Nusantara (PTPN) III to develop New and Renewable Energy power plant in the Sei Mangkei Special Economic Zone in North Sumatra, with a capacity of 5 megawatts.

President Director of PT Pertamina Power Indonesia Ginanjar, on April 30 stated, this cooperation was also a continuation and improvement of the previous cooperation in which PT Perusahaan Perdagangan Indonesia (PPI) and PTPN III had cooperated in developing renewable energy sources in the form of building a Biogas Power Plant in Sei Mangkei with a 2.4 MW capacity which when it is under construction and will operate in November 2019.

Previously, EMR Minister Ignasius Jonan stressed that 23 percent of the energy mix must come from renewable energy by 2025, including through the implementation of the Clean Coal Technology steam power plant, wind and solar power.

In 2025, the government encouraged the construction of a 6.5 gigawatt solar power plant. This seriousness is an implementation of Indonesia’s commitment in the Paris Agreement.

Furthermore, in 2050, the government targets the renewable energy mix to increase to 31 percent. While the petroleum energy mix will be reduced to around 20 percent of its use.

Currently, the new power plant that has been operated by PT PLN or Independent Power Producer  or private sector has reached 66,000 MW. That is, the target of 6.5 GW is 10 percent of the total power plant built in Indonesia.

Written by Willy Matrona, Email: