Indonesia Sees Product Demand Up 160,000 b/d by 2026

Indonesia expects domestic oil product demand to increase by 12pc or around 160,000 b/d by 2026, but an expansion of refinery capacity should eliminate the need for imports.

Indonesia imported 24.7mn kilolitres (425,000 b/d) of oil products last year, meeting 33pc of demand. Its domestic refineries accounted for other two thirds of requirements, with output of around 880,000 b/d, according to the energy ministry's director of downstream oil and gas business development, Mohammad Hidayat.

Fuel demand is expected to rise to 1.47mn b/d in 2026, based on projected growth of 3.2pc/yr. But energy ministry expects domestic refined product output to rise by around 70pc to hit 1.5mn b/d by then, reducing the need for product imports.

The country initially aimed to reach self-sufficiency by 2023, but project delays have pushed this back. It aims to achieve the goal by adding two new refineries and upgrading four existing plants.

Indonesia is Asia-Pacific's largest gasoline importer, taking about 300,000 b/d. The removal of its import demand could pressure production margins, particularly as new refineries come on line in the region. It also imports about 83,000 b/d of gasoil, but has already significantly reduced jet fuel imports in line with a government push to cut the country's import costs.

The two new refineries planned are a 300,000 b/d plant at Bontang, which is due to be completed in 2025, and a 300,000 b/d refinery at Tuban.

The refinery plans include upgrades to increase capacity by 15pc to 400,000 b/d at the Cilacap refinery; double capacity at Balongan to 240,000 b/d; increasing Balikpapan refinery capacity by 38.5pc to 360,000 b/d; and upgrade the 170,000 b/d Dumai refinery.

But Indonesia's downstream plans have consistently failed to live up to expectations. A joint venture with state-controlled Saudi Aramco to upgrade Cilacap fell apart last month, leaving state-owned Pertamina to go it alone.

Cilacap mirrors similar delays of projects to increase capacity at new and existing Indonesian refineries, which have been plagued by drawn-out negotiations, community opposition and Pertamina's financial difficulties. Pertamina has made minimal progress on much of its partnerships with foreign investors forged in the wake of the election of Indonesian President Joko Widodo in 2014 and his drive to overhaul the energy sector and boost infrastructure in the country.