You are here

End cheap gasoline imports, says Indonesia's governance team

Sunday, December 21, 2014 - 22:39

[ JAKARTA] Indonesia should stop importing lower-quality grade gasoline to improve the transparency of its fuel imports, the country's new oil and gas governance team recommended on Sunday.

Energy Minister Sudirman Said set up the governance team last month to help the new administration rid the industry of graft and restore investor confidence.

Indonesia, which is expected to become the world's largest gasoline importer by 2018, is the only major buyer of gasoline with an 88 research octane number (RON), and this provides opportunities for malfeasance, said Faisal Basri, head of the governance team.

It is the only grade subsidised by the government. "Indonesia is the only market for RON 88, opening a chance for a cartel to be created since they only sell to Indonesia,"Mr Basri told reporters.

The team recommended that the government replace RON 88 by importing more RON 92, the main, unsubsidised gasoline grade which is readily available on global markets.

The government should also upgrade domestic refineries to produce the higher grade fuel instead of RON 88, Mr Basri said.

Indonesia imports 10 million barrels of RON 88 and RON 92 gasoline per month, which are sold as Premium and Pertamax, respectively.

Pertamina, the main provider of subsidised fuel, said it was not yet ready for such a change. "Pertamina asks for fair competition because if the choice is only Pertamax without subsidy there will be open competition with other RON 92 sellers such as Shell and Total ," said Ahmad Bambang, Pertamina's director of trading and marketing.

He said Pertamina would not be able to meet the recommendations until refineries were upgraded, which could take four to six years.

The energy ministry has yet to comment on the recommendations.

Since taking office two months ago, President Joko Widodo has imposed major changes on the energy sector, including a fuel price hike to cut ballooning state subsidies, the dismissal of Pertamina's board, and a probe to weed out what he calls the country's "oil mafia".

The reform team this month is expected to announce its recommendations on the future of Pertamina's oil trading arm, Hong Kong-based Petral, which critics want moved to Indonesia to improve oversight.

REUTERS