BBM price shouldn’t be a periodic dilemma!

By: Edy Sahputra Sitepu

For the umpteenth time SBY government intends to raise fuel prices again. That should be a record and make a sad, every time the fuel will be increased, the assumptions and logic of government has never changed. The reason in this increase was not much different from the previous one, due to rising world oil prices exceeded $100, while the assumption of oil price in 2011 state budget stood at USD 80 per barrel.

Why does the government always stuck with the same problem? Donkey just does not want to fall twice in the same hole. So, why the increase in fuel always become periodic dilemma (subscription), which seemed inevitable, and often increase the burden on public and sparked political chaos. Why after all this time, still not seen as well an attempt to completely avoid the risk of fuel price hike? After all, many proactive steps can be taken, for example by making a more accurate state budget planning, design roadmap independence (self-reliance) energy and fuels, exploring alternative energies. Is it true that the reasons and assumptions set forth the government to raise fuel, or just making it up right? And many other questions are not answered properly in this country.

Let us first recall the background of a number of fuel price problems (if do not want to be called a crisis) in the country. First, the management of fuel in Indonesia is still very far from efficient. Indonesia’s oil reserves depletion rate reached 8 times higher when compared with the rate of depletion in the countries of the world’s major oil producers like Saudi Arabia and Libya.

With oil reserves of around 4 billion barrels, Indonesia oil produced an average of 1 million barrels per day (bpd), so the reserve to production ratio (RPR) Indonesia is equal with 4.  This figure is far below Saudi Arabia and Libya. With oil reserves reached 265 billion barrels, Saudi Arabia’s oil producing only an average of 8 million bpd, or the RPR level reaches 35. While Libya, with 46 billion barrels of oil reserves and production rate of 1.5 million bpd, has 30 rate of RPR.

This means that as we deplete our oil reserves of approximately 8 times faster than Saudi Arabia and Libya, unfortunately without being followed by extensive new oil fields. Exploitation peaked in the period 1975-1976 with the level of oil production in the western region of 250 thousand bpd and to be the largest contributor to the national production of 1.5 million bpd. Since then, the national oil production continues to decline and now only produces 70 thousand bpd.

The decline of the national oil production is still covered with spines of reserve depletion that began around the 1980s, with production levels of approximately 400 thousand bpd. Exploitation in Duri make national production reached its peak in 1995-1996 of 1.6 million bpd. Now, the national oil and Duri fields only produce 360 thousand bpd. Banyu Urip field in Cepu is expected to produce 165 thousand bpd in 2014 from the current 20 thousand bpd. With fuel consumption number above 1.2 million bpd and domestic refinery capacity of 700 thousand bpd, the rest of fuel needs to be imported.

Second, although quite a lot of oil field was found, but the size is much smaller. Instead of exploration which is intensively carried out recently in Eastern Indonesia in fact resulted in the discovery of gas reserves in large quantities, such as in deep water Makassar Strait area (Gandang, Gendalo, Gehem, etc.), Masela (Timor Sea) and finally by Genting Oil in Bintuni. Oil reserves are large enough in Indonesia are mostly located in the western region, such as field Duri, and Cepu.

The low discovery of oil reserves, due to declining oil and gas investment in the country. This happens because of the complicated oil and gas investment oil and gas after the implementation of UU No. 22/2001. By the law, the investment process could take five years due to pass through a lot of bureaucracy. In fact, with the previous oil and gas law, UU No. 8/1971, it only takes three months. Oil and gas investment in Indonesia even listed as one of the worst in the world which is based on a survey of Global Petroleum in 2010 Indonesia is on the order of 111 from 133 countries.

Third, the most important but neglected i.e., there is no clear roadmap of Indonesia’s oil reserves. The roadmap is actually very vital because, according to Geologists Association (IAI) Indoneasian oil reserves only around 4 billion barrels. It might even actually about 3.7 billion barrels. But whatever it is, probably only about 10 years. More over, RI oil production is only about 945 000 barrels/day. If we continue to ignore this in the future we will even have to import 1.3 million barrels per day of petroleum. Though oil consumption is certainly going to grow as the economy grows every year and the population increases. The use of oil in Indonesia is minus 400.000 barrels per day.

Solution

There is no problem that can not be resolved, what we should do are only provided  careful effort and earnest. This periodic problem-solving scenario must be considered comprehensively. A number of strategic step to resolve the problem should be stated as follows. First, governments should develop Indonesia’s oil reserves roadmap towards self-sufficiency in oil and energy. The roadmap should include a scenario for how Indonesia can be freed from dependence on oil imports to meet domestic demand continues to increase. The Government should also look for alternative solutions based on smart and national interest, not foreign interests.

Secondly, it’s need more serious effort from the government to address the declining trend in the supply of fuel oil. Governments should encourage the exploration and geological studies to get a new outlook backup location. Thus, the higher education of earth science, associations, Lemigas, BPPT, geological agency need to jointly and reintegrate to build the petroleum industry. The college and university should be involved optimally for data and information availability by performing a variety of surveys and researches.

Third, in terms of investment, investors need to be stimulated to offer such attractive incentives for investors who are able to increase oil and gas exploration and production activities in a variety of potential oil and gas basins. During the previous decades the effort are more likely to increase production, whereas on the other hand the increase in exploration also urgently needed. The policy support to boost exploration budgets was felt far from enough. Imagine, the state budget allocation for oil and gas exploration is very low, only 0.07%. This is what causes the attraction for potential investors for exploration activities to be low and the government is not able to present data on potential oil and gas an interesting and accurate.

Fourth, contracts and profit-sharing scheme for contractors are also expected to be more flexible and attractive. It is inline with the difficulty and a greater risk of the search for oil reserves. The government should think of this exploration activities investment for, because with no awareness, this oil production crisis will continue to be a real .

Fifth, Recently only 50 percent of oil production that can be processed domestically, while 35 percent were turned over to the contractor to pay the cost recovery oil refineries abroad, and the remaining 15 percent of production for profit sharing with the contractor. In the future, it needs to be pursued that all oil processed carried out in the country refineries. In other words the government should take steps to takeover of 35 percent to pay for cost recovery If 85 percent of oil production is processed in the country, then it is sufficient for domestic fuel.

In addition, agreed with a number of discourse, a few other things to do are to increase the windfall profit tax or additional tax on oil company profits due to soaring world crude oil, cutting oil trade flows within the framework of export-import, applying additional taxes to private vehicle to its use of subsidized fuel, to increase refinery capacity in accordance with the specifications Pertamina Indonesia’s crude oil and require that all foreign contractors to sell all its oil quota to Pertamina to be processed in the country and for domestic needs, preparing for CNG infrastructure in 1 year period for the entire of Indonesia and creating a friendly investment climate for exploration needs to have new and additional discoveries of oil reserves.

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