Indonesia's fuel demand drops amid concerns of tighter pandemic measures

Singapore — Indonesia's daily consumption of transport fuels like gasoline dropped nearly 16% since work-from-home guidelines were introduced in mid-March, and the demand destruction could accelerate with tighter restrictions placed in the capital Jakarta since Friday.

The decline in transport fuel demand in Southeast Asia's largest economy could play out similar to other Asian countries, where gasoline, diesel and jet fuel inventories rose quickly, forcing refinery margins and utilization rates to fall, resulting in lower crude imports.

Indonesia's daily fuel consumption fell by 16% to 113 million liters currently, from a typical daily consumption of 134 million liters in mid-March, Fajriyah Usman, spokeswoman for national oil company Pertamina, said earlier this week.

However, daily subsidized LPG demand in Indonesia increased by 1% to 22,117 mt from typical levels of 21,927 mt in the same period, and unsubsidized LPG demand also increased by 9%, she said. This reflects increasing household energy demand as more people stay home.

"So far, Indonesia has not imposed stringent lockdown measures as seen in other countries. However, with the situation worsening it seems likely that restrictions on travel and business will accelerate, which is definitely negative for demand," Alex Yap, senior analyst at S&P Global Platts Analytics, said.

Indonesia's refined product demand in 2019 was around 1.5 million-1.6 million b/d, according to official estimates. The bulk of this was imported gasoline which could drop sharply if travel curbs tighten.

Indonesia's gasoline imports in 2019 were at a five-year high of 14.55 million mt due to stronger demand for low-octane gasoline and stringent fuel specifications, government data showed.

On the other hand, its gasoil imports in 2019 slipped 33.4% year on year as it was displaced by biodiesel and its jet fuel imports fell 82% year on year in 2019, due to higher domestic production, the data showed.

The benchmark Singapore gasoline crack against Dubai crude was at minus $2.17/b in the first week of April, compared to a positive crack of $4.84/b in January, Platts Analytics data showed. Jet cracks narrowed to $1.99/b from $11.09/b in the same period, while naphtha cracks were in negative territory this year, the data showed.

PARTIAL LOCKDOWN

The Indonesian government has been resistant to the idea of a full lockdown due to the adverse economic impact, despite a death toll of 221 as of Thursday, according to WHO data -- the highest in a Southeast Asian country so far.

On April 7, its capital Jakarta, the epicenter of its COVID-19 infections, imposed tighter social distancing guidelines, leaving only essential services operational.

"We think Indonesia has been the slowest in terms of taking decisive measures and is therefore most at risk of delays in containing the outbreak within its borders, with larger negative economic consequences," economists at Japanese bank Nomura said in a note.

Indonesia may ultimately be required to impose more drastic measures for longer given the poor response so far and an immediate concern is the upcoming religious holiday that risks increasing transmission due to the surge in domestic travel, they added.

So far, state-run Pertamina's refineries have been running normally, the company spokeswoman said earlier this week.

Any impact on Indonesia's crude imports will be cushioned as Pertamina has already cut imports by 38% in 2020 to boost domestic crude purchases and narrow the fiscal deficit.

Pertamina imported 212,000 b/d of crude in 2019, or 23% of its total requirements. Indonesia's total crude demand in 2019 was around 1.3 million-1.4 million b/d and its domestic production about 750,000 b/d.

PERTAMINA CAPEX

Separately, Pertamina's upstream director Dharmawan Samsu said in a statement that crude production in the first quarter of 2020 rose by 2% year on year to 919,000 b/d of oil equivalent, comprising 421,000 b/d of crude and 2.887 Bcf/d of gas.

Out of this, Pertamina's international business contributed 156,000 boe/d, mostly from its Algeria operation, Samsu said.

The business plan was being evaluated in anticipation of lower crude prices and the impact of the COVID-19 outbreak, he added, without giving details of any capex cuts.

"Pertamina continues to maintain the upstream investment level in order to meet national oil and gas needs, both production and lifting, but with some adjustments based on priority so that project economics can be achieved," Samsu said.

Pertamina has set aside $7.8 billion of capex this year, an 84% increase from $4.2 billion in 2019. The biggest share is for the upstream business at $3.7 billion to achieve Indonesia's target to produce 1 million barrels daily by 2030.

Pertamina aims to produce 923,000 boe/d in 2020, compared with 2019 volume of 906,000 boe/d.