Iraq Willing to Supply an ‘Unlimited’ Quantity of Crude Oil to Indonesia

From Jakarta Globe

Indonesian has received a long-term commitment from the Iraqi government to supply the Southeast Asian nation with crude oil to meet domestic needs, a high-ranking official said on Monday.

Susilo Siswoutomo, the Indonesian deputy minister for energy and mineral resources, said the Iraqi government was willing to supply Indonesia with an “unlimited” supply of crude oil. “There’s even a discussion to make this partnership last 50 years,” he added.

Susilo was among the Indonesian government officials who visited Iraq last week. The delegation, which was led by Coordinating Minister for the Economy Hatta Rajasa, cut short their visit after a bomb was set off near the Indonesian Embassy.

Susilo said state-owned energy firm Pertamina had signed a memorandum of understanding to secure a crude oil supply amounting to 65,000 barrels per day.

Going forward, Iraq and Indonesia could become major partners in the latter’s plans to develop more oil refineries. Susilo said Indonesia intends to source its crude oil supply for future oil refining facilities from the war-torn country.

“Indonesia could get 300,000 barrels of oil per day from Iraq just for the first stage of refinery development,” the deputy minister said.

However, it is up to Pertamina to make the final decision, with Susilo saying the oil and gas firm might shop around before agreeing to a deal with Iraq.

“Moreover, the Iraqi government also wants to participate in refinery development in Indonesia by acquiring some interest,” he added.

In the past couple of years, Indonesia’s reliance on oil imports has increased as domestic output has failed to keep pace with demand. Oil output was 826,000 barrels per day last year, while demand stands at 1.3 million barrels per day.

Indonesia lacks sufficient oil refining capacity to meet its domestic demand. There are six major oil refineries in Indonesia with a combined capacity of 1.1 million barrels per day.

Hanung Budya, Pertamina’s marketing director, had previously disclosed that the firm imported up to 11 million barrels of oil-based fuel per month to keep pace with domestic demand. Such high imports have weighed on Indonesia’s fiscal health, leaving Indonesia with a trade deficit last year.

According to the Trade Ministry, Indonesia booked a trade deficit of $5.6 billion in oil and gas, outstripping the $3.9 billion surplus from other commodities.

To reduce the country’s dependence on fuel imports, the government has laid out plans to build three oil refineries, each with a capacity of processing 300,000 barrels of oil per day, with two of them to be built by Pertamina.

Pertamina will partner to Saudi Arabia’s Aramco to build a refinery in Tuban, East Java, while the other refinery, located in West Java’s Balongan, will be developed together with Kuwait Petroleum.

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