Oil price hits $64, RI fails to reap profit

Oil price hits $64, RI fails to reap profit

Urip Hudiono, The Jakarta Post, Jakarta

While other members of the Organization of Petroleum Exporting
Countries have reaped windfall profits from skyrocketing global
oil prices -- which hit US$64 a barrel on Tuesday -- Indonesia's
heyday is long over now that the country imports more of the
commodity than it exports.

Coordinating Minister for the Economy Aburizal Bakrie
announced on Tuesday that domestic oil production was only 1.06
million barrels per day (mbpd) and would remain at that level
until the end of the year.

Therefore, the country has to import 300,000 barrels of crude
oil per day and 400,000 barrels of fuel products to meet surging
domestic demand.

"We have become a net oil importer, and this will surely
affect the condition of the state budget," he said.

The government has assumed oil production at 1.125 mbpd in the
2005 state budget, which was recently revised to reflect a more
realistic oil price and rupiah exchange rate.

Although Indonesia's status as an exporter or importer is
debatable as the country's oil trade balance alternates by the
day, statistics tend to indicate it is an importer.

"On average, our days of being a net oil importer outweigh
that of being a net oil exporter," Aburizal said.

His statement echoes that of Minister of Finance Jusuf Anwar,
who said in the government's mid-term budgetary progress report
to the House of Representatives last week that Indonesia's oil
production averaged 1.019 mbpd and would likely only improve
slightly to 1.075 mbpd by year-end.

Since 2002, Indonesia has failed to meet its output quota of
1.425 mbpd, prompting a review of its OPEC membership status.

Lower-than-expected production will pose more challenges for
the government in managing the state budget deficit. Revenue from
oil exports during the first half of the year only reached Rp
18.5 trillion (US$1.89 billion), less than a quarter of its Rp
85.6 trillion estimate, based on an average oil price of $45 a
barrel and a rupiah exchange rate of Rp 9,300 to the dollar.

Meanwhile, the fuel subsidy, which the government disburses to
state oil and gas firm PT Pertamina for oil imports, has guzzled
Rp 40 trillion this year, more than half of its Rp 76.5 trillion
full-year allocation, and is expected to reach Rp 112 trillion by
the end of the year.

Pertamina's huge dollar demand for oil imports amid soaring
oil prices, however, only adds to the central bank's fiscal
headache in containing recurring volatility between the rupiah's
exchange rate and inflation.

To deal with the problems, Aburizal said, the government has
no other option but to improve the country's energy investment
climate to boost oil production.

"In the worst-case scenario, the government may also have to
reduce the fuel subsidy," he said.

The government cut the fuel subsidy in March, leading to an
average 29 percent increase in domestic fuel prices. The money
saved from the subsidy has been earmarked for assistance funds
for low-income families amid the resulting surge in inflation.