Higher oil prices, sliding local currency, and deteriorating government finances have led to Indonesia’s state oil firm Pertamina seeking to reduce expenses in U.S. dollars, and the company has issued tenders to buy spot crude oil, gasoline, and gasoil in its domestic currency the rupiah, or currencies other than the U.S. dollar, S&P Global Platts reported on Friday, citing tender documents it has seen.
Indonesia—the biggest gasoline importer in southeast Asia—typically imports between 7 million and 9 million barrels of gasoline per month.
Indonesia is cutting expenses on crude oil and fuel imports amid rising international oil prices, trying to reduce a swelling account deficit. The local currency, on the other hand, touched earlier this month its weakest level against the U.S. dollar in more than 20 years.
Earlier this week, Basuki Trikora Putra, Pertamina’s director of corporate marketing, told Reuters that the oil company was looking to cut its spending of U.S. dollars and that the Integrated Supply Chain unit, as issuer of tenders, “has requested to use other currencies apart from U.S. dollars, including rupiah.”
A few days before that Pertamina issued a tender to buy crude oil for delivery in Q1 2019, according to a tender document seen by Reuters. The state oil firm wants to purchase up to 5.7 million barrels of low-sulfur crude oil from West Africa, Malaysia, Vietnam, or Brunei, in currencies such as the euro, rupiah, Chinese yuan, Japanese yen, or Saudi Arabia’s riyal.
In a bid to cut its current account deficit, currently at 3 percent of gross domestic product (GDP), Indonesia introduced last month new legislation to prioritize local crude oil production over imported crude oil. The new regulation stipulates that oil and gas operators in Indonesia must first sell their production to Pertamina in Indonesia before considering exports of crude oil.