ESDM unveils 4 strategies to boost forex reserves from oil and gas subsector

September, 24 2018 | 21:19 pm ESDM unveils

As the US dollar strengthens, the Indonesian government has taken various measures to protect the nation’s foreign exchange reserves from further decline. As one of the most vital contributors to the nation’s economy, the Energy and Mineral Resources (ESDM) Ministry unveiled its strategies recently.

The ESDM’s oil and gas director general, Djoko Siswanto, said on Wednesday (19/9) that four strategies had been prepared from the oil and gas subsector. The first strategy is to implement B20 (biodiesel) in all state-owned energy firm Pertamina’s gas stations.

B20 is a diesel fuel made with 20 percent palm oil mixture. Implementing B20 could reduce the nation’s oil import quota since the 20 percent palm oil comes from local supply, thus saving foreign exchange reserves.

The second strategy is buying crude oil that belongs to oil and gas contractors operating in Indonesia (KKKS). Usually, the contractors export their oil production, while Pertamina imports crude oil to fulfill the nation’s fuel consumption.

With this strategy,  the government could reduce imports and save foreign exchange reserves. This import-reducing attempt also applies to the third strategy,  which is to increase the local content requirement (TKDN) in oil and gas infrastructure construction.

The fourth strategy is a letter of credit (L/C) obligation for companies that want to buy energy and mineral resource products. This policy is expected to increase the nation’s earnings in US dollar currency.

“All countries or companies intending to buy energy products such as coal, gold, or anything, they have to use an L/C issued in Indonesia. For those with a foreign L/C, they are required to move it to Indonesia,” Djoko explained.

Previously, Minister Ignasius Jonan also said that the ministry had set various strategic policies to control imports and strengthen foreign exchange reserves in the energy and mineral resources sector.

The strategies include a power project revamp, mandatory B20 implementation, enforcement of a local content requirement (TKDN) and issuing a new natural resources export policy to ensure 100 percent of the earnings return to Indonesia.