December 12, 2024 [CNA]- Indonesia plans to build an oil storage facility on an island near Singapore – aligning with President Prabowo Subianto’s goals for energy self-sufficiency – amid geopolitical uncertainty, according to a government minister.

On Wednesday Minister of Energy and Mineral Resources Bahlil Lahadalia said that the new storage facility will be designed to store various types of oil, although he did not disclose the exact location and details of its construction.

“The storage facility will be able to store oil for up to 30 to 40 days and Pertamina will purchase oil (from the facility) at global economic prices so that we can achieve energy sovereignty,” he was quoted as saying by local media platform Detik, at a Golkar party event in Jakarta.

This means that the new facility will enable state-owned energy firm Pertamina to purchase oil in bulk, reducing reliance on the volatile global market, amid ongoing wars in Gaza and Ukraine which have caused disruption to global oil and gas supply chains.

Putra Adhiguna, managing director at think tank Energy Shift Institute, welcomed this move, saying that the new facility could potentially offer “strategic buffer (oil) reserves”, and adding that the reserves Indonesia currently have are for operational use.

“This is an important move, considering Indonesia is a major oil importer so having strategic buffer reserves is crucial for stability, especially with the president’s agenda on energy security,” Putra told CNA.

According to an Antara report in April, Pertamina’s main fuel import sources are Singapore, comprising 56.58 per cent of total fuel imports, followed by Malaysia at 26.75 per cent and India at 6.28 per cent.

Meanwhile, the United States, the United Arab Emirates and Qatar are the main sources of Pertamina’s imported liquefied petroleum gas.

The new facility thus also seeks to reduce Indonesia’s heavy reliance on Singapore, as reported by The Jakarta Globe.

“Singapore does not have oil, but Indonesia imports 60 per cent of its oil from the country. This is utterly mind-blowing to me,” Bahlil, who is the Golkar party leader, said on Oct 11, as quoted by Antara.

The initiative is also expected to reduce costs related to third-party storage, transportation and intermediary fees, thus facilitating more cost-efficient oil purchases.

Despite having none of its own oil and gas resources, Singapore is one of the world’s top three export refining centres, according to the country’s Economic Development Board.

The city-state imports crude oil from countries such as the United Arab Emirates, Qatar, Saudi Arabia and Kuwait.

In addition, Bahlil also highlighted Indonesia’s low oil supplies which he considered a concern, emphasising the importance of increasing storage capacity to enhance energy resilience.

“This is a geopolitical issue. If our country goes to war, our oil reserves and storage can only last for 21 days,” he was quoted as saying by the Jakarta Globe.

The new Prabowo administration reportedly aims to revive oil and gas production, with plans to reduce regulations, reactivate idle wells and enhance output in hopes of reversing a decade-long decline in output.

“We must have energy self-sufficiency and we are capable (of being) self-sufficient,” Prabowo said in his inauguration speech on Oct 20, citing geopolitical tension.

He had also planned to tap on efforts by the previous administration under former president Joko “Jokowi” Widodo to enhance massive gas discoveries in the Bay of Bengal’s South Andaman and lift biofuels use. In October, Bahlil said that the Indonesian government planned to maximise the use of existing oil fields to reduce crude oil imports, which have reached a value of approximately 500 trillion rupiah (US$31.4 billion) annually.

To achieve this goal, the government plans to revive oil fields that have been lying idle by revoking licenses, he added.

“I asked why these wells are not being operated and the answers were unclear, it seems that I will initiate the revocation of business licenses as we are looking at the potential to reorganise wells that are not being worked on by contractors, including state-owned enterprises,” he said on Oct 9, as quoted by the Jakarta Globe.

Based on data from Bahlil’s Ministry of Energy and Mineral Resources, Indonesia has nearly 45,000 oil fields, with 16,600 considered inactive.

Among these idle fields, around 5,000 are seen to have the potential to be revitalised to boost national oil production.

“For wells that are not being optimised, we will revoke their license and offer them to those capable of increasing our national production, we should not hold on to them, our country needs this,” Bahlil added.

Formerly a member of the Organisation of the Petroleum Exporting Countries (OPEC), Indonesia’s oil production has declined to under 600,000 barrels per day in 2024, from a peak of around 1.6 million barrels per day in the 1990s, a decline that is attributed to ageing blocks and sluggish investment.

At the same time, oil consumption in the country has more than doubled to 1.5 million barrels per day, leading to imports of oil and fuel products that have averaged US$28 billion annually in the past decade.

This oil issue has contributed to the fluctuating value of the rupiah, as reported by the Jakarta Globe.

INDONESIA’S GREEN GOAL

Meanwhile, at the G20 Summit held in Brazil last month, Prabowo announced that his government planned to phase out the country’s use of fossil fuels, while drastically boosting Indonesia’s renewable energy capacity in the next 15 years.

He made similar remarks during the Asia-Pacific Economic Cooperation (APEC) summit in Peru on Nov 14.

“We will probably be one of the few countries that can achieve 100 per cent renewable energy in a few years. We can replace fossil fuels with renewable energy,” he said then.

Indonesia’s energy mix currently includes fossil fuels and renewables, but fossil fuels dominate at more than 80 per cent of the total used, according to data gathering website Statista.

Putra from Energy Shift Institute emphasised that the move to build an oil storage facility should not be viewed as contradictory to Prabowo’s green goal, but rather it provides a “buffer” to the security challenges.

“Self-sufficiency in its transport sector (for instance) especially will largely mean going into EV (electric vehicles) over time but this process will take time … Thus, an intermediary path of self-sufficiency (by building storage) is expected,” Putra told CNA.

CNA earlier reported that analysts considered Prabowo’s ambitions to combat climate change “a bit too far from reality”, considering some of the policies in place by the government appear to have the opposite effect – such as an increase in non-renewable energy usage.

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