Indonesian Government Seeks Private Investments in Oil Refineries
The government of Indonesia plans to add new fuel refineries soon after such development has been postponed for many years. Today, Indonesia's total of oil refineries have roughly the same combined production capacity as a decade ago, indicating that limited progress has been made. In fact, domestic oil output has experienced a steady downward trend for almost two decades due to a lack of exploration and investments amid weak government management, bureaucracy, an unclear regulatory framework and legal uncertainty.
However, one of the ambitions of the Joko Widodo-led government is to supply enough energy in order to meet the country’s (rising) energy demand, and it has two strategies to realize this ambition. Firstly, it intends to revitalize and modernize existing refineries. Regarding this first strategy, state-owned energy company Pertamina will play an important role (through its refinery development masterplan Pertamina already set the target to raise the company’s oil production capacity from 1.05 million barrels per day to 1.6 million barrels per day by 2020). Secondly, the government aims to enhance domestic oil refineries by inviting the private sector to invest in this sector through public-private partnerships (PPP). The government plans to provide incentives in order to make investing in Indonesia’s oil refineries more attractive. However, no specific details have been announced yet about these incentives.
Meanwhile, Indonesia’s Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) said that the country’s domestic oil production will only reach 798,000 barrels per day (bpd) by the end of the year, short of the government’s oil lifting target that was set in the 2015 State Budget (818,000 bpd). Not meeting oil lifting targets has been a normal phenomenon in Southeast Asia’s largest economy. Causes for this year’s failure are delays in the start of operation of several oil fields (Lapangan Banyu Urip, Blok Cepu and Lapangan Bukit Tua).
Indonesian Oil Production and Income:
| Production | State Income |
|
| 2015¹ | 900,000 bpd | IDR 327.0 trillion |
| 2014¹ | 818,000 bpd | IDR 309.3 trillion |
| 2013 | 826,000 bpd | USD $31.3 billion |
| 2012 | 860,000 bpd | USD $33.5 billion |
| 2011 | 900,000 bpd | USD $35.9 billion |
| 2010 | 945,000 bpd | USD $26.5 billion |
| 2009 | 949,000 bpd | USD $20.0 billion |
¹ forecast
Source: Investor Daily