BPH Migas mulls new kerosene for households
Leony Aurora, The Jakarta Post, Jakarta
Amid rampant smuggling and soaring fuel subsidy spending, the government is considering a plan to launch a new kind of kerosene for household use that it is hoped will save the state almost Rp 18 trillion (US$1.9 billion) per year.
The new household kerosene would be a mixture of pure kerosene and bunker oil, Oil and Gas Upstream Regulatory Agency (BPH Migas) chairman Tubagus Haryono said during a presentation to the House of Representatives recently.
"The Oil and Gas Institute (Lemigas) is currently conducting a study on the proper composition of the new kerosene," said Tubagus, adding that the results were expected in June.
As the new fuel would have a higher carbon content, the study would also look into possible affects on health and the environment, said Tubagus.
"The quality (of the new kerosene) will not be as good as pure kerosene, but it will be able to fire a stove," he said.
Assuming that households consumption of kerosene reaches 9.46 million kilo liters (kl) per year and the composition of the new kerosene is 65 percent bunker oil and 35 percent regular kerosene, the state could save Rp 17.87 trillion annually.
BPH Migas' calculations showed that based on such a composition, only 4.35 million kl out of the 9.47 million kl of pure kerosene produced in the country -- using data from last year -- would be used by domestic households and industries in one year.
The rest of the kerosene, some 5.12 million kl, could be exported at $416 per kl. To produce the new household kerosene, the government would have to import 6.15 million kl of bunker oil at $211 per kl.
With dollar trading at Rp 8,900, the state would make Rp 7.42 billion from this alone.
The state would also be saved the need to spend some Rp 8.4 trillion to provide some 2.26 million kl of imported kerosene to secure domestic supplies.
As a mixture, the new kerosene would have a lower standard price of Rp 2,471 a liter compared to pure kerosene at Rp 2,790 a liter, meaning that the state would save another Rp 3 trillion in fuel subsidies.
Many low income households across the country still use heavily subsidized kerosene, sold at Rp 700 a liter or a quarter of its standard price, to cook.
Rampant smuggling to other countries and vendors opting to sell kerosene to industry, which is required to buy it at Rp 2,200 a liter, often cause kerosene scarcities in the archipelago, particularly in remote areas.
It is hoped that the new household kerosene will stop smuggling. "It is not pure kerosene and thus cannot be sold on the international market," Tubagus said.
The new kerosene would not be suitable for industry, said Tubagus. Households, however, would not need to modify their stoves for the new product.
The new kerosene would not require a major investment as no new refineries would be needed. "The mixture could be made at the depots," he said.