Oil Report

RPT-Indonesia says '08 fuel subsidy may triple to $14 bln

JAKARTA, March 24 (Reuters) - Indonesia may have to nearly triple its planned 2008 fuel subsidy spending to around 130 trillion rupiah ($14.11 billion) due to soaring global oil prices, Finance Minister Sri Mulyani Indrawati said on Monday.

Indrawati told reporters the subsidy spending may have to rise if the government revises its average oil price in its 2008 budget to $95 per barrel.

The original budget allocated 45.8 trillion rupiah for oil subsidies with a global oil price assumption of $65 per barrel, whereas the oil price is hovering around $100 a barrel currently.

President Susilo Bambang Yudhoyono’s administration has pledged not to make an unpopular increase in domestic oil prices ahead of elections in 2009, although there are growing concerns over ballooning subsidies.

The energy ministry had said the government may need to revise the oil price in its 2008 budget to between $90-$95 per barrel to reflect the real global price.

“If we assume an oil price at $95 dollar per barrel, with 37 million kilolitres of oil products we have to subsidise, then the (oil subsidy) figure might have to be increased to 130 trillion rupiah,” Indrawati told reporters.

Indonesian state oil firm Pertamina has said that high oil prices are likely to prompt more Indonesians to use subsidised gasoline, boosting consumption by 6 percent to 18 million kilolitres (113 million barrels) in 2008.

Indonesia has budgeted for subsidised low octane gasoline consumption of 16.9 million kilolitres in 2008, while it also expects to subsidise 11 million kilolitres of diesel oil and 7.8 million kilolitres of kerosene.

Indonesia is Asia’s top diesel and gasoline importer.

Under Indonesian law, state budget revisions needs parliamentary approval.

Indonesia, Asia-Pacific’s only OPEC member, has turned a net importer of crude oil in recent years after production has slumped as the country failed to tap new fields fast enough to offset its ageing reservoirs.

The country has to import 30 percent of the country’s oil products for consumption.

Price increases are a sensitive issue in Indonesia. In May 1998, a big rise in fuel prices triggered rioting that helped topple former President Suharto. (Reporting by Muklis Ali, writing by Muhammad Al Azhari, Editing by Ed Davies)