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Indonesia Eximbank news and announcements.

31 Jan 2019

Oil and Gas Exports in 2018

Oil and gas exports from Indonesia have recently suffered from deficit, resulting in a decline of exports from this sector. As the decline occurs irregularly (e.g. exports may be low this month, but not the next), the Indonesian Statistics Bureau (Badan Pusat Statistik) has advised the government to note the country’s fluctuating state of oil and gas exports. The country still exports these commodities, though at a considerably lower amount, and has resorted to importing them instead.

A decline in oil and gas exports occured in January 2018, where it decreased to USD 1,29 billion compared to exports in December 2017, which were valued at USD 1,51 billion. The decline continued three months later in April 2018, where exports suffered from a 11,32% decline compared to the previous months’ figures. May 2018 saw significant progress where exports increased by 10,9%. Though exports may have increased that month, the Indonesian government also increased the amount of imports of oil and gas up to its highest figures since 2015, which reached 20,95% compared to the previous month. After the brief increase in May, exports declined again in the following months. 

The Vice Minister of Energy and Mineral Resources (ESDM), Mr. Arcandra Tahar, identified the following possible factors that contributed to the country’s fluctuating state of oil and gas exports:

  • The ownership of oil and gas previously owned by several foreign blocks for their own export needs have been transferred to PT. Pertamina to fulfil domestic oil demands. 
  • A recent government policy dictating the amount of exported oil that must be sold to PT. Pertamina in order to strengthen the value of Indonesian currency.

Additionally, a decline in oil and gas production could also explain why exports of these commodities have been suffering considerable deficit. Less oil is being produced due to the following reasons:

  • Crude oil is not a sustainable natural resource, while Indonesia has been exploiting the resource for decades. The amount of oil stockpiled in reserves is declining. 
  • The Indonesian oil and gas sector is limited in its capabilities to produce and extract stocks from oil reserves. 

Indonesia was once a prominent exporter of oil and gas. It was once a member state of the OPEC (Organization of Petroleum Exporting Countries), which counts Saudi Arabia, the United Arab Emirates, Nigeria, and 11 other countries in its membership. The aforementioned problems above have driven Indonesia to suspend its OPEC membership indefinitely, as the oil and gas sector have become increasingly unreliable to become the country’s main source of foreign exchange through export.

A considerable decline in exports followed by a significant increase in imports causes a country’s trade balance to suffer from deficit, often in high numbers. If Indonesia reverses this condition by importing less and exporting more, it could potentially become a prominent oil exporter once again.