Indonesia to Process More of its Oil as Southeast Asian Supplies Fall

Reuters

JAKARTA, Nov 5 (Reuters) - Indonesia's state-owned energy firm Pertamina plans to process more domestic crude oil in a bid to limit the impact on the country of declining production, a plight that is also affecting oil-rich neighbours Malaysia and Brunei.

All three countries, which rely heavily on energy revenues, are running out of oil. Reuters research based on government, industry and consultancy data shows they could run dry within the next 25 years.

"Pertamina intends to maximise domestic crude processing to reduce dependence on the market," said Daniel Purba, vice president for integrated supply chain at Pertamina, outlining plans to buy more locally produced supplies.

It would also use more biofuels and liquefied petroleum gas (LPG) to limit diesel imports, he said.

The three Southeast Asian nations are heavily dependent on oil revenues, with oil rent - the value of oil production after costs - equal to about 15 percent of the national budget in Indonesia, rising to 40 percent in Malaysia and almost 100 percent in Brunei.

While production estimates can change with new discoveries and technology, many of the big fields that have propped up their budgets in recent decades are declining, with low oil prices limiting the prospect of increased recovery or finding new sources.

Governments are facing losing hundreds of millions of dollars in revenues, with annual production output declining at between 1.5 percent and 4 percent, while oil and gas prices have more than halved since 2014.

Indonesia's Long Slide

Indonesia's crude production, which peaked in 1981, dipped below 1 million barrels per day (bpd) in 2011 and is set to fall towards 600,000 bpd by 2020, Purba said. The country currently has less than 13 years of reserves.

Each 10,000 bpd production decrease costs Indonesia $73 million in lost revenue, said Parulian Sihotang, deputy chairman for financial controlling at regulator SKKMigas.

Indonesia currently processes around half of its domestic crude output. Purba said Pertamina hoped to have a sales tax waived to allow it to buy more domestic oil from local producers.

The company was eyeing about 200,000 bpd of crude and was in talks on buying output for next year or further out.

He also said Pertamina would continue to expand its portfolio of oil producing assets and planned to develop oil and gas wells in Algeria this year.

Neighbouring Malaysia has chosen to invest in refining to help offset dwindling production.

Malaysia is developing huge oil and gas processing facilities next door to Singapore, which will allow it to process imported or domestically sourced petroleum for resale at a higher value rather than simply export dwindling reserves.

In Brunei, which is almost totally dependent on oil and gas revenue, falling prices and output led to a near 10 percent budget shortfall in 2014, a figure likely to rise this year.

(Reporting by Henning Gloystein, Hidayat Setiaji, Fergus Jensen and Wilda Asmarini; Editing by Richard Pullin)



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