PT Pertamina booked US$2.53 billion during last year, lower than $2.54 billion in 2017. Photo: Privacy.

JAKARTA (TheInsiderStories) – Indonesian state oil company, PT Pertamina has agreed to purchase 650 million barrels oil per day (MBOPD) of ExxonMobile crude from the Banyu Urip Field, Cepu Block under a government plan requiring all contractors in the country to sell their output to the state energy firm to curb imports.

“Pertamina has made an agreement to purchase 650,000 barrels of crude oil in September. Later, crude oil from the ExxonMobile‘ Banyu Urip field will be processed at the Balikpapan refinery,” Pertamina Corporate Communication Vice President Fajriyah Usman told the media in Jakarta, Monday (09/16).

Pertamina’s move to buy crude oil from the domestic cooperation contract contractor is the implementation of Minister of Energy and Mineral Resources (MEMR) Regulation No.42 of 2018 concerning Priority of Utilization of Petroleum for Meeting Domestic Needs, the acting director-general of oil and gas, Djoko Siswanto sid separately.

In the rule, Pertamina and business entities holding petroleum processing business licenses must prioritize oil supplies that come from within the country. In addition, the contractors or affiliates are required to offer their share of oil to Pertamina and/or business entities.

So far, the total volume of crude oil purchased by Pertamina has reached 123,6 MBOPD from 39 production sharing contract operating in the country in August. With the additional supply of crude oil from contractors, imports of crude oil are cutting automatically.

From Pertamina’s data, during the first half of this year, the realization of oil imports was 220 MBOPD or 25 percent of the company’s total oil absorption of 901 MBOPD. Meanwhile, oil imports in 2018 were 339 MBOPD or 37 percent of the total absorption of 910 MBOPD.

Pertamina previously has agreed to purchase 116.9 MBOPD from 37 production sharing contract operating in the country. Last year, oil and gas have absorbed 12.8 MBOPD. Pertamina explained with the purchase of domestic crude oil, it can increase Indonesia’s energy sovereignty.

“By taking domestic crude oil will support our efforts to secure the raw materials supply for Pertamina refineries,” said Usman in an official statement adding it would continue to expand cooperation based on agreements with each contractors cooperation contract.

Now, Pertamina has no longer imported heavy and super-heavy crude oil and only imports light and medium crude types. Earlier, Pertamina has reduced the crude oil and condensate imports by around 50 percent in the first four months of 2019. The oil and gas producer succeed to lowered the import costs worth of US$1.4 billion.

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, Usman said. 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.

On April, she added, Pertamina has made an agreement to purchase 137 MBOPD 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.

Considering last year’ current account deficit, the 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, it’s unit, has collaborated with PT Perkebunan Nusantara 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.

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 to 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 PLN 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 Lexy Nantu, Email: lexy@theinsiderstories.com