Indonesia Aims to Slash Fuel Oil Usage to Boost Currency Value

The Indonesian government plans to significantly reduce fuel oil usage in an effort to strengthen the country's currency, which has been experiencing a decline in value. Coordinating Minister for the Economy Aburizal Bakrie announced the new strategy after a cabinet meeting, highlighting the potential benefits of reducing oil consumption, settling the oil exploration contract for the Cepu Block, and altering subsidies. The government aims to reduce fuel oil imports, which will subsequently lead to a decrease in oil subsidy expenditures, ultimately contributing to a rise in the rupiah value.

Key Takeaways:

• The Indonesian government plans to reduce fuel oil consumption to boost the country's currency value.
• The government aims to complete the construction of non-fuel oil Units at power plants in Cilacap by the end of this year and next year, respectively.
• The 660-MW Unit I of Tanjung Jati B power plant is scheduled for completion in January next year, while Unit II in June.
• The construction of two hydro-power plants in North Sumatra and South Sulawesi is expected to be operational soon.
• 175 million tons of fuel oil have been used to produce 100 megawatts.
• Reducing fuel oil consumption by industries will lead to a decrease in oil import expenditures.
• President Susilo Bambang Yudhoyono has called for a switch in the target of fuel subsidies from products directly to the people, ensuring that the poor enjoy the benefits.
• Fuel oils are considered elastic products, meaning that an increase in price will result in a reduction in consumption.
• The Indonesian government hopes to settle the oil exploration contract on the Cepu Block by September 25 this year.
• If Indonesia can increase its oil production, it may change from a net importer to a net exporter.
• The country suffers a loss of Rp10 trillion for every month of delay in production.
• The government's plan to reduce oil consumption is expected to have a substantial positive impact on the economy.

Statistics:

• Fuel oil consumption: 175 million tons to produce 100 megawatts.
• Oil imports: Aimed to be reduced to raise the rupiah value.
• Oil subsidy: Rp120 trillion for this year, with a monthly expenditure of Rp10 trillion.
• Delayed production: Results in a loss of Rp10 trillion per month.
• Coal Units: 660-MW Unit I completion in January next year, Unit II in June.
• Hydro-power plants: Expected to be operational soon in North Sumatra and South Sulawesi.
• Power plants capacity: Non-fuel oil Units to generate 330 megawatts.

Sources:

• Asia Pulse, 29 August 2008.
• ANTARA, 29-08 1227.