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Indonesia races to convert oil to gas amid price hike
The Indonesian government is speeding up the conversion of oil-based fuel to gas in an effort to cut mounting oil subsidies following soaring global oil prices, a minister said on Wednesday.
Government plans to increase oil price by 33 per cent to 6,000 rupiah per litter (USD 0.65) were rejected by lawmakers on 1 April, Xinhuanet reported. However, it was given a conditional right to raise the price if the average of Indonesia's crude oil price went higher by 15 per cent in the past six months from the assumption at the state budget.
The decision has increased the net-oil importer country's already high oil subsidies to USD 14.96bn from around USD 13bn.
"We speed up the conversion of oil to gas by providing huge funds to build the infrastructures," said Coordinator Minister for Economy Hatta Rajasa.
Indonesia has proven-oil-reserves of 3.7bn barrels and much more proven gas reserves of 106tr cubic feet, making the country the world's 14th largest holder of proven natural gas reserves.
The conversion program is expected to reduce the oil subsidies.
The minister said that the government would put priority on Jakarta and its outskirt cities; this would be followed in other cities nationwide.
"As many as 100 gas stations were going to be built in Jakarta and its outskirt cities," he said.
The state-owned oil and gas firm PT. Pertamina was to take responsibility for the establishment of the stations in Jakarta and its outskirt cities and private sectors in other cities, said Hatta.
The industry ministry has started importing converted kits this year before the local industry could manufacture them, he said.
Indonesia has struggled to boost oil production which has been dwindled in recent years due to aging wells and lack of fresh investment.
Indonesia's crude oil output averaged 739,491 barrels a day in January, lower than the government's target of 817,423 barrels a day for this year, Raden Priyono, chairman of the country's upstream oil and gas regulator, BP Migas has said.
Indonesia imports both crude oil and refined products as the country's oil production has started to decline since 1998 and led Indonesia to exit from the OPEC in 2009.