Indonesia Cuts Crude Import by Top Refiner to Tackle Deficit

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Indonesia ordered its top refiner to limit the purchase of crude oil from overseas this year as the former OPEC member seeks to source more fuel locally to tackle a persistent current account deficit.

The energy and mineral resources ministry issued PT Pertamina with a permit to import only 50 million barrels of crude this year, below the 80 million barrels the state refiner sought, acting Director-General of Oil and Gas Djoko Siswanto told reporters in Jakarta on Tuesday.

Indonesia directed local oil producers in 2018 to sell their output to Pertamina at market price in a bid to lower its crude import bill, a major contributor to the nation’s trade deficit. The refiner bought about 120,000 barrels of oil a day from local explorers last year and it can lift an additional 80,000 barrels a day this year, Siswanto said.

The ministry curtailed Pertamina’s import target “so that it will try to buy local crude and continue to negotiate for output that has not yet been bought,” Siswanto said.

Pertamina will strive to stick to the import quota set by the government by optimizing local crude sourcing, company spokeswoman Fajriyah Usman said in a text message. The company secured 147 million barrels of crude locally from 43 contractors in 2019, compared with 10.1 million barrels a year earlier, she said. That helped the refiner cut imports last year by 30% to 212,000 barrels a day, she said.

President Joko Widodo has asked his cabinet to take steps to process more resources domestically to boost export revenue and, within three years, plug a current-account deficit hovering near 3% of gross domestic product. That gap widened to a four-year high in 2018 and remains a key vulnerability for Southeast Asia’s largest economy.

The world’s largest palm-oil producer also has raised the required blend of palm biodiesel to 30% from 20% starting April, which should help lower imports of fossil fuel. Indonesia’s production of oil and gas has been dropping as fields age and the country struggles to attract foreign investment.

Indonesia’s daily crude oil production is about 750,000 barrels, while total consumption is estimated at 1.3 million to 1.4 million barrels a day, government data show. Pertamina plans to build about a half-dozen new refineries over the next decade to double refining capacity and trim imports of oil products.

To contact the reporter on this story: Eko Listiyorini in Jakarta at elistiyorini@bloomberg.net

To contact the editors responsible for this story: Stephanie Phang at sphang@bloomberg.net, Thomas Kutty Abraham, Ben Sharples

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