Indonesia gasoline use seen up

By Muklis Ali

JAKARTA (Reuters) - Indonesia's consumption of subsidized low-octane gasoline could be 10 percent higher this year than originally targeted and even higher next year, the chief executive of state oil company Pertamina said on Monday.

While Indonesia's government has just hiked fuel prices by an average of almost 30 percent in a bid to cut its costly fuel subsidy bill, Southeast Asia's biggest economy still has some of the lowest fuel prices in the region.

"We predict this year's consumption, if it goes like this, will be over the present figures. We will see an increase, maybe about 10 percent this year," Ari Soemarno said, speaking to the Reuters Global Energy Summit from Jakarta.

Soemarno welcomed the government's fuel price hike last month, but said that domestic prices still did not reflect global prices and therefore did not discourage consumption, as has happened in countries fully exposed to crude oil prices that soared to a record high over $135 a barrel last month.

"Energy flexibility in Indonesia is very low...because they are so used to this cheap fuel," he said, adding that the price of fuel should be based on the market price.

Soemarno said that fuel prices needed to be increased further, although with elections due next year, that is a political decision.

"I think it needs to be increased. But whether the government will decide that...we leave that up to the government."

Indonesia has budgeted 16.9 million kilolitres (106.2 million barrels) of subsidized gasoline in 2008.

Soemarno also said the company has revised its crude oil output target to 160,000 barrels per day (bpd) in 2008.

Pertamina officials had said previously that the company would produce 180,000 bpd in 2008.

"We have to verify the individual fields, so we revised our target to 160,000 bpd," Soemarno said.

Pertamina produced 143,000 bpd of crude last year from several fields, including in South Sumatra and on Java island.

"We are planning to increase our production in the next five years," Soemarno said, adding that Pertamina will increase production to about 800,000 bpd of oil equivalent in the next five years, from 360,000 bpd this year. He did not give details.

CARD NOT SO SMART

The government has said it plans to introduce a "smart card" for cars in Jakarta, so that consumption of subsidized fuel could be rationed.  Continued...