Subsidy Ban to Force Rise in Indonesia Fuel Imports

Faisal Maliki Baskoro | December 13, 2010

Questions are mounting over the preparation for planned cuts in fuel subsidies starting in January after state oil and gas company Pertamina said on Sunday the plan would force it to import massive quantities of high-octane fuel next year to meet demand.

Questions are mounting over the preparation for planned cuts in fuel subsidies starting in January after state oil and gas company Pertamina said on Sunday the plan would force it to import massive quantities of high-octane fuel next year to meet demand.


Indonesia. Questions are mounting over the preparation for planned cuts in fuel subsidies starting in January after state oil and gas company Pertamina said on Sunday the plan would force it to import massive quantities of high-octane fuel next year to meet demand.

Under the plan, subsidized Premium fuel would be off limits to private car owners in Jakarta from Jan.1 and the whole of Java and Bali from July 1. Drivers would have to buy higher-octane Pertamax fuel at Rp 6,500 a liter, almost 50 percent more expensive than Premium.

Pertamina spokesman Mochamad Harun said importing fuel would be essential.

“Our data showed in May that consumption of Pertamax was at 1,200 kiloliters per day,” he said. “It’s at 2,600 kiloliters per day now and it will go up if the government goes ahead with its plan. We will have to import high-octane fuel.’’

He said Pertamax use has risen rapidly this year because of increased awareness about the fuel’s efficiency and doubts raised about the quality of Premium this summer.

The government has long planned to phase out subsidies altogether by 2014 and has been considering options for the first set of subsidy cuts since the middle of this year. Mochamad, however, said Pertamina did not have any numbers on the possible increase of imports under the government’s plans as it had not made any preliminary calculations.

With Java alone consuming more than 20,000 kiloliters of Premium every day, the amount of Pertamax needed could be up to 500 percent more than the amount now being produced.

Mochamad said most Pertamax was produced at Pertamina’s Balongan refinery in West Java, which has a production capacity of 325,000 barrels per day.

He said Pertamina plans to double the capacity there by 2016. The government had been inviting investors to fund the expansion, which is estimated to cost $5.2 billion.

The government is scheduled to meet with the House of Representatives (DPR) today to discuss the subsidy ban plans, and the House must vote on the plans before the session ends on Friday.

Meanwhile, signs of Premium scarcity are already popping up. Long lines of people queuing to buy Premium at several filling stations have been reported in the past few days, including in Cilegon, Banten province, and Gorontalo in Sulawesi.

The biggest fears are for filling stations in Greater Jakarta, where the ban will hit first, as only just over half of filling stations sell Pertamax, although Pertamina was quick to reassure the public on Sunday that there would be enough fuel.

“There are around 700 gas stations in Greater Jakarta, of which around 400 are equipped with Pertamax. We also have an adequate number of stations equipped with Pertamax in big cities and that is sufficient,” Mochamad said. Pertamina has around 5,000 gas stations nationwide, with 35 percent selling Pertamax.

“Building gas stations would not require a lot of investment. We can share the cost with gas station owners. It will be as expensive as building a new refinery,” he said.

The figures do not add up for energy research institute ReforMiner, however, which on Sunday accused the government of being unprepared.

“It is going to be hard to limit subsidized fuel consumption from Jan. 1 because not all necessary facilities have been prepared,” institute director Komaidi said.

Latif Adam of the Indonesian Institute of Sciences (LIPI) shared the view that the government was “not yet ready.”

http://www.thejakartaglobe.com/news/subsidy-ban-to-force-rise-in-indonesia-fuel-imports/411352