Fri, 02 May 2008
Ika Krismantari

The government plans to sell half of its stockpile of 14 million barrels of crude oil this year to increase revenues to compensate for oil subsidy demands amid rising oil prices.

Energy and mineral resources Minister Purnomo Yusgiantoro said Tuesday the government would sell 30,000 barrels per day (bpd) over eight months this year, amounting to about 3 percent of the country's oil sales target.

"Our crude oil storage is very high how," Purnomo said. "We will soon look for tankers to transport the oil."

This year, the government targeted a production rate of 977,000 bpd.

The government is under pressure as record oil prices are pushing up spending on fuel and electricity subsidies. Under the revised 2008 state budget, in which the government assumes the price of oil to be US$95 a barrel, the fuel subsidies allocation is set at Rp 126 trillion, while electricity subsidies are at Rp 60 trillion.

However, with oil hovering at around $120 a barrel, the allocations are expected to continue to soar, posing a threat to the country's fiscal stability.

Indonesia is the only member of the Organization of Petroleum Exporting Countries (OPEC) which is a net-oil importer.

Purnomo did not mention the expected proceeds from the planned sale of the stockpile but, under the state budget oil price assumption, the sale could result in $665 million for the state coffers.

Analyst Pri Agung Rakmanto said the stockpile Purnomo was referring to was actually "idle oil", the kind the government produced in previous years but did not sell mostly due to infrastructure-related problems.

The government last year produced an average of 950,000 barrels per day (bpd), but needed to import almost 500,000 bpd to meet domestic consumption of 1.4 million bpd.



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