Minister, DPR agree on basic macroeconomic assumptions for energy and mineral resources sector in 2019 state budget proposal

September, 22 2018 | 00:03 am Courtesy of ESDM
Courtesy of ESDM

The Energy and Mineral Resources Ministry and the House of Representatives’ Commission VII, which oversees energy and mineral resources, have reached an agreement on the basic macroeconomic assumptions for the energy and mineral resources sector in the 2019 state budget proposal.

Energy and Mineral Resources Minister Ignasius Jonan as well as Vice Minister Arcandra Tahar attended a work meeting on Sept. 17 in the House led by commission chairman Gus Irawan Pasaribu.

Representatives from energy and mineral resources sector stakeholders, such as state-owned energy company Pertamina and state-owned electricity company PLN as well as the Downstream Oil and Gas Regulatory Agency (BPH Migas) also attended the meeting.

After the meeting, both the ministry and the House decided to set the Indonesian Crude Price (ICP) assumption at US$70 per barrel. The 2019 state budget proposal’s ICP assumption increased compared to the 2018 assumption, which amounted to $48 per barrel. The increased assumption takes increased global oil price into consideration.

Meanwhile, the 2019 state budget proposal macroeconomic assumption of the country’s oil and gas lifting, the colloquial term for ready-to-sell production, amounts to 2,025,000 barrels of oil equivalent per day (boepd). The oil lifting figure has decreased by around 25 boepd while the gas lifting figure has decreased by around 50 boepd when compared to the macroeconomic assumptions included in the 2018 state budget proposal.

The ministry and the commission also set oil and gas cost recovery levels from $8 billion to $10 billion, respectively, in the 2019 state budget proposal. They have decreased oil and gas subsidies to a total of 15.11 million kiloliters (kl), comprising 0.61 million kl of fossil fuel subsidies as well as 14.50 million kl of Solar-branded diesel.

Meanwhile, they have increased subsidies for 3-kilogram liquefied petroleum gas canister subsidies to 6.978 million tons, up from 6.450 million tons in 2018.

The government has also increased Solar-branded diesel subsidies to Rp 2,000 (13 US cents) per liter, marking a Rp 1,500 increase from its amount in 2018, which stood at Rp 500 per liter. It has also agreed to allocate Rp 57.67 trillion in electricity subsidies.

The ministry responded positively to the abovementioned basic macroeconomic assumptions.

“We accept this decision positively and we recommend that the commission announce these decisions immediately to the House of Representatives Budget Committee,” Jonan said.

The ministry and the commission have also agreed to allocate a Rp 4.9 trillion budget for the Energy and Mineral Resources Ministry in the 2019 state budget proposal.

On the sidelines of the work meeting, participants also conducted a focus group discussion where the government as well as state-owned and private companies could formulate common strategies to maximize the effectiveness and efficiency of their programs and activities.