KATADATA - Amongst the oil importers countries, Indonesia is one with no sustaining energy reserves. There are many people that see this as a concern, considering that the domestic oil production continues to decline due to the lack of new oil field discoveries.
And thus, the government is now preparing Presidential Regulation about the sustaining reserves. Up until now, Indonesia only has operational fuel reserves that belong to PT Pertamina enough to fulfill 22 days of needs.
The target here is the fuel reserves would be upgraded to be able to take in 45 million barrels for 30 days of consumption needs. This is of course with the assumption that the daily fuel consumption is at 1.5 million barrels. “If we have large reserves, we can be the market leader,” Andy Noorsaman Sommeng said to Manal Mustaqo and Muchamad Nafi from Katadata in Jakarta, last weekend.
According to the Downstream Oil and Gas Regulatory Agency (BPH Migas) Chief, if the state is able to become the market leader, then Indonesia would not need to rely on Singapore anymore. Indonesia indeed imports a lot of fuel through Singapore. And as the result, the price is set by them.
And as one of the solutions, Andy said, Indonesia need to soon build new refineries and create sustaining energy reserves. The plunging oil price to be below US$ 50 per barrel is the right time to realize their plan. With a warm tea in his hand, Andy explained his views about the sustaining reserves to Katadata for around one and a half hour in his office, fourth floor of BPH Migas building, Friday noon last week. Below here is the interview:
How far has the discussion developed regarding the forming of Sustaining Energy Reserves?
The National Energy Council (DEN), stakeholders, and us have talked about it for several times already. It is not finished yet. Like for example, what does the energy reserve means: operational, sustaining, and strategic reserves? A strategic reserve, according to DEN, is the reserve that is still within the earth but it’s already proven. A sustaining reserve is the reserve that is above the earth already, ready for operational use. And an operational reserve is the corporate action of each company. However, the definition from many countries, strategic reserve is the reserve that is ready but is not allowed to be used, since it’s only allowed for emergency situation.
Who will manage the Sustaining Energy Reserves? Companies?
It must be an independent institution. Companies can form this and to be fair and monitor the country’s needs. The government must also contribute. In Japan, the government is the one who funds the majority of the needs.
If Japan has JOGMEC (Japan Oil, Gas, and Metals National Corporation) that manage the reserves and seek profits, can the sustaining institution be like that?
JOGMEC comes from the private sector in 1970s, when there was an oil crisis. The market structure was opened. For us it’s different. From the history, our country is producer. But, do we want the market structure to be still like it is now that considers us as rich in oil? Right now we don’t have them. If we’re still like that, considering the traders or merchants as threats, then we’ll never move forward.
Currently the oil prices are plunging. Is it the right time to build the storage?
When the prices are plunging, buy them all and store them. This is strategy. Many see us as oil producers that people who want to do trade or business within the country and build refineries are considered to disrupt the business. It should not be like that.
They are from the State-owned Companies?
Yes. I’m a grandson from a Pertamina’s employee. I want this company to be like Petronas, to go overseas. To enrich the reserves abroad and then take them back to our homeland. The exploration within the country is very little.
What if the Sustaining Energy Reserve is delegated to the private sector?
We can’t. Private sector is still weak. The only one that can deliver the oil in this country is Pertamina, and the same goes for electricity, which is PLN. Private sector is still small.
Can the Sustaining Energy Reserve be commercialized?
It can’t, it must not be a business. If there ever was a scarcity, the companies would be in trouble.
What about the concept of ‘forward placement’?
It’s a concept to move the market abroad back to the country. Right now, our oils are mostly being delivered from the storage in Singapore. And from there, the oil is moved to the country, for example in Karimun. To move the storage, there are posts and changes taking place, like the customs for example. People can still do the production but it can’t be delivered to the country because of the tax cost and others.
Will it be safe and not leaked within the country?
It can happen. The transaction is only on a piece of paper. It can be delivered directly and by using the MOPS (Means of plats Singapore) price, the benchmark price for the oil market, it would not be charged with customs.
How would BPH Migas play its role?
It must be clear first that the market will be opened. The conditions that hinder us will be fixed. BPH Migas will the regulator in its region. We’ll find it, let’s say in the borders or the eastern zone. Also, we must not hinder Pertamina’s business.
What is the benefit of having sustaining energy vessel?
If we have large reserves, then we can be the market leader. We can be the determiner in setting up the prices in Asia. Right now, we’re being set by Singapore.
There are some who suggest building the Sustaining Energy Reserves without the government’s funding.
I agree. Long time ago, back in the 1960s, the government was the one who regulate things and the private sector was still very little. Right now there are many private companies. They should be involved in the nation’s development by investing their money within the country. The situation must be made conducive.
About the private operational reserves, how would BPH Migas play its role in increasing their reserves?
It’s their authority. But then, sustaining reserves agent like JOGMEC can be regulated by the government. For example, the minister can set the national fuel reserves should be for 30 days. And then we can also verify it ever months if there’s not enough action.
What is still not adequate right now?
We only need to wait for the minister’s decision now. Let’s say the government through the Energy and Mineral Resources Minister is to set the reserves to be for 30 days. It is not Pertamina that must realize it, they just feel that it’s their job. What it means by 30 days here is that all suppliers must participate.
America owns sustaining reserves for three months, why is it like that?
This is hand-in-hand with the International Energy Agency (IEA) condition. The minister is good enough to be willing to be the IEA member. By becoming a member, he would always be verified. And then there’s also this thing about subsidy. The subsidy is not a good action since it is a non-renewable resource. Even if it is used there must be compensation for the Premium depletion.
In a moment the oil and gas statute will be issued. What must our focus be on?
I hope so that BPH Migas can be strengthened, and still be as the energy regulator authority; not just for oil and gas, but also for the biofuel, electricity, and natural gas. The market structure must be formed. Don’t be allergic with the word ‘market’. What we should be allergic to is the primitive market where there are cartelization, monopoly, and oligopoly. If the market is adjustable and regulative, then it’s okay.
Does BPH Migas have any intention of becoming special corporation?
No. If we are a corporation then we must do business activities, unlike regulator. We are the referee that stand in the middle, one that is just, fair, and transparent in taking decision like in a public hearing.