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NEW UPDATES Asean Affairs  27 July 2015  

Govt seeks to reserve funds to fend off fluctuating prices

Indonesia: The Energy and Mineral Resources Ministry has revived plans to provide special funding to cushion the impact of fluctuating global prices on the nation amid losses suffered by state-owned oil and gas firm Pertamina.

The special funding, named the “Petroleum Fund”, would finance upstream industry exploration as well as reserve funds to make up for the disparity between government and global oil prices, which has affected Pertamina’s financial condition.

“We want Pertamina to keep the price stable, but we want to prevent the corporation from suffering losses,” Energy and Mineral Resources Minister Sudirman Said told reporters on Wednesday.

“We have to compensate Pertamina’s losses,” he added.

Since the eradication of fuel subsidies under President Joko “Jokowi” Widodo’s administration, Pertamina has been subsidizing octane-88 Premium, as the government set the fuel price below the market price to maintain the public’s purchasing power.

Pertamina suffered a US$212.3 million loss during the January to February period this year, a huge slump from around $490 million in net profits during the same two-month period last year, partly due to Pertamina selling oil at a far lower price than the corporations had paid for it.

The government price of Premium at the end of March, which stood at Rp 7,400 (55 US cents) per liter, was Rp 750 lower than the market price.

With 6.7 million kiloliters of Premium sold by Pertamina in the first quarter, Pertamina may have spent at least Rp 2 trillion ($149 million) in the two months alone to subsidize the Premium.

With the new funding mechanism, the government plans to reserve the gains from when the global oil price slumps lower than the government price to compensate Pertamina’s losses when there are further price hikes. The ministry’s oil and gas director general IGN Wiratmaja Puja said that the fund is planned to be submitted to the House of Representatives next year.

Oil and gas companies are currently suffering from declining oil prices following a supply glut of US shale oil. The crude oil benchmark West Texas Intermediate was at $49.26 per barrel on Thursday, according to figures from Bloomberg. Another global benchmark, Brent, was at around $56.05 per barrel on Thursday.

Wiratmaja also stated that the funds might be managed by Pertamina, but he hoped that they would be under another body for the next year.

The ministry might propose sourcing the funds from the state budget, while still refusing to call it another subsidy program. Energy think tank ReforMiner Insitute deputy chairman Komaidi Notonegoro warned the government about the move, which they fear is a step backward.
Komaidi also warned the government to determine whether Pertamina had the legal right to receive the compensation.

“It is weird that the government doesn’t subsidize but Pertamina is asked to sell below the market price. But there is no article in the revised state budget that Pertamina could claim its losses under. It should be discussed in the House of Representatives,” Komaidi argued.

The plan to set aside a petroleum fund was also raised in 2012. At that time it was planned to be sourced from the government’s non-tax revenue from the oil and gas sector. It was also included in the proposal of the Oil and Gas Law revision. However, deliberations for revising the law were halted.

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This year in Thailand-what next?

AseanAffairs   04 January 2011
By David Swartzentruber      

It is commonplace in journalism to write two types of articles at the transition point between the year that has passed and the New Year. As this writer qualifies as an “old hand” in observing Thailand with a track record dating back 14 years, it is time take a shot at what may unfold in Thailand in 2011.

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