Florence Tan, Singapore – Indonesia's crude imports will keep rising over the next few years as its economy rebounds and a delay in getting peak output from the giant Cepu oil field defeats efforts to cut dependence on overseas crude.
Indonesia's need for crude imports for its simple refineries will feed competition among top Asian buyers such as China and India for sweet grades as regional supplies from matured fields dwindle while strong dated Brent prices may curb arbitrage flows from the Atlantic Basin.
"I think it is a combination of increased demand, less product imports in favor of crude and improved refinery utilization," said Al Troner, president of Asia Pacific Energy Consulting.
Southeast Asia's largest economy imported 11 percent more crude this year than in 2009, at around 103,000 barrels per day, as refineries improved processing rates. This followed annual declines of 10 percent to 12 percent between 2007 and last year, data from Reuters and FACTS Global Energy showed.
The country will remain one of Asia's top buyers of sweet crude to feed its refineries, which lack upgrading capabilities to process domestic grades that have increasingly higher sulfur content. It has also built new storage tanks for bigger imports.
Indonesia could have boosted its refinery utilization to 90 percent to 95 percent from 80 percent to 85 percent in recent years, said John Vautrain, from Purvin & Gertz in Singapore. But a lack of new oil refining capacity, as well as growing use of gas and coal in critical industries, could cap purchases over the next few years.
The former OPEC member's push to limit oil imports by boosting domestic supply took a hit from problems last month at its two largest fields, Minas and Duri, with production set to fall short of the 965,000-bpd goal this year. Declining output at Indonesia's aging fields and sudden shutdowns in oil wells have often derailed its plans to meet annual production targets.
"The problem in Indonesia has been, other than these big projects [Cepu, Tangguh], there's been no other big new sources of crude oil," said Stuart Traver, from Gaffney Cline and Associates.
Exxon Mobil expects peak oil production of 165,000 bpd from its Cepu block, one of the oil major's top 10 projects worldwide, to be delayed until the end of 2013, with current production seen around 20,000 bpd.
Indonesia needs a plan to spur operators to either explore more or try to enhance production in its own existing fields, Traver said. "A big, big part of Indonesia's future is how they get companies to explore and develop discoveries in the deepwater [off eastern Indonesia]," he said.
Indonesia has been trying to ease its reliance on imports by tapping more domestic supply for refineries and cutting the use of oil products for power and fertilizer production by switching to coal and gas. It aims to use renewables for a quarter of its total energy mix by 2025, with coal at 32.7 percent and gas at 30.6 percent.