Indonesian crude oil: Should we process it or just sell it?

Indonesian crude oil: Should we process it or just sell it?

Indonesia is a very rich country. It has great number of sources, both human and natural sources. We have so many kinds of natural sources, such as wood, coconut, coal, tin, nickel, gold, copper, LNG (liquefied natural gas) and also oil. Those sources are spread from the west side to the east side of this country, some with a huge supply. In oil and gases, we have also an abundant supply. In 2005 we’re one of the leading exporter country in LNG with proven and potential reserves of 170-180 TCF (trillion cubic feet). As an oil producer country, in 2005 we’re included in “20 top oil producing country”.

In so many years, the Indonesian government has decided to export our oil in crude oil and import ready oil. After reading some article about this fact, it made me thinking why Indonesia aren’t trying to process all of its crude oil but still continue that tradition. I think the government should try to look seriously about this fact, whether we should try to process the crude oil by ourselves or just sell it.

Although we produced a great number of oil, but we still need to import oil to fulfill the oil need in this country. Till now, this country consume about 1,22 million barrels per day (mbpd), it’s not as much as our oil production. From our total production we export almost half of our production in crude oil condition and buy the ready one. Crude oil cannot be used until it is processed in oil refinery. Oil refinery is an industrial process plant where crude oil is processed and refined into more useful petroleum products, such as gasoline, diesel fuel, asphalt base, heating oil, kerosene, and liquefied petroleum gas⁽²⁾. It needs a big investment to build an oil refinery. Oil refinery usually be build by matching the crude oil composition that will be processed in it because there are some differences crude oil composition from one place to another.

In 2006, Indonesia ranked 20^th among world oil producers, about 1,02 mbpd and its production continue to decline. Indonesia's oil reserves are approximately 9.7 billion barrels in 2003. Till now, Indonesia has some oil refineries but not all of them are capable to process the crude oil in Indonesia (about 30,000-40,000 bpd should be exported because no refinery specifications meet the expectation). To fulfill the oil need in Indonesia, the government import ready oil about 345.700 bpd⁽³⁾. The Indonesian government take this decision because they have the perception that they can get the benefits at being a net importer, benefiting from the gap between the export and import oil amount. It’s very unlikely because as we see in 2006, the price of the export crude oil per barrels is 60,73 US$, and the import ready oil price is 63,48US$. From those gap, we’re loss about 3-4 US$ per barrel. How if we sell the crude oil in million barrels? We’ve already suffered a very heavy loss. I think it is not relevant anymore if someone said that Indonesia has no ability to process all of its own crude oil in its own refinery, because we know that the technology has grown so fast so far. It is now depends on the government intention whether they want to change that export crude oil tradition or not.

Pertamina, by the end of 2008 was trying to build 3 refineries with 6,000 barrels per day capacity. Although those refineries capacity aren’t big enough to process all of our oil production and also to decline exporting crude oil tradition and importing ready oil, I think it was a good step ahead. We can maximize the profit in this sector by investing the oil refineries, we’re a very rich country, why don’t we make all of Indonesian people feel that we’re rich?