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Mismanagement in Oil Production

05/10/08 14:35
Indonesia mismanaged its oil potentials, observer

Jakarta (ANTARA News) - Indonesia could have reaped great profits from the current high world crude oil prices and would not have plunged into its present difficult situation if it had managed its oil potentials well, oil industry observer Dr Kurtubi said.

He said Indonesia`s failure to manage its oil wealth properly in the past few years had caused its crude oil production to decline and led to its dependence on oil imports which had now placed the country in a difficult position.

Dr Kurtubi made the remarks in an interactive discussion on fuel oil prices which was organized by the Regional Representatives Council (DPD) here Saturday.

Kurubi said that as a result of the improper management of the country`s oil potentials, the government was now facing difficulties in maintaining the state budget amid the sky-rocketing of crude prices in the world market.

"Indonesia could have reaped huge profits from the world crude price hikes but mismanagement of our oil potentials has caused us to face difficulties now," Kurtubi said.

He said Indonesia`s current oil output was about 927,000 barrels per day. With this oil production level, it was difficult for Indonesia not to import oil.

In the current situation where crude oil prices have surged to around US$125 per barrel, the government had to spend a large amount of funds to import oil.

"If we want to be safe and gain profit from world crude price hikes, we have to pump up at least 1.3 million barrels per day. If that level is achieved we will be safe in the face the world oil turbulences," he said.

With an output of 1.3 million barrels per day, the government could afford to spend Rp26 trillion to Rp30 trillion on fuel oil subsidy without having to raise domestic fuel oil prices, he said.

The government has decided to raise domestic fuel oil prices due to the upward trend in global crude prices which was expected to cause its fuel oil subsidy burden to rise well beyond the projected amount.

It was previously reported that the price of premium gasoline would be raised from Rp4,500 to Rp6,000 per liter, diesel oil from Rp4,300 to Rp5,500 per liter and kerosene from Rp2,000 to Rp2,300 per liter.