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The Convergence of a Looming Energy Crisis?

Road Side Gas Pumps, Aviation Fuel and the Islandís Electrical Supply - All Under Threat.

(6/27/2005) Separate local press reports all suggest trouble ahead in the energy sector with shortages of vehicle fuels, aviation fuel and electrical supplies all threatening to converge and disrupt the daily life of Bali's residents and visitors alike.

Lines at the Gas Pumps

Local television reports tell of sporadic fuel shortages at Pertamina gas pumps at various locales across the Nation.

Confusion reigns as to the exact cause of the current fuel shortage, however, executives from the State Oil Company point to sky-rocketing world fuel prices on the spot oil market and the late disbursement of funds to Pertamina by the State Treasury as the underlying cause.

Finance officials, however, tell a different story, blaming inefficiency and bad management at Pertamina.

Critical reserves of domestic fuel supplies now stand at around 17-18 days, a figure below recommended minimums of more than 23 days. Hoarding mentalities, boosted by gowing fears that the crisis might deepen further, are causing gas pump line-ups and shortages in various locations, primarily in the border regions near Singapore, East Java and Makasar.

A Domino Effect at PLN?

Meanwhile, PLN - the monopoly supplier of electrical power to Indonesia, has blamed the lack of fuel supplied by Pertamina as the cause of temporary shut downs of power stations and the resulting brown outs to private homes and commercial enterprises. This latest problem in electrical supply further compounds already existing threats to the Java-Bali power grid resulting from ongoing repairs at several main generating stations in Java.

A Threat to Aviation Averted?

Meanwhile, Pertamina threatened briefly to stop supplying airlines with avtur after June 30, 2005.

Under threat were airlines objecting to pay a mandated 10% value-added-tax (V.A.T.) resulting from a decision by the Minister of Finance to apply the tax on fuel used on international flights and, moreover, to apply the tax retroactively to 1998. This resulted not only in instantly highter fuels costs but also in a massive "balloon" debt for the State Oil Company who appealed to the Minister of Finance for the rescinding of the VAT on avtur.

On June 23, 2005, tempointeraktif.com reported that the Ministry of Finance had finally relented, agreeing to eliminate the 10% V.A.T. on fuel purchased for overseas flights, thereby averting a problem that potentially threatened to abruptly end service by some foreign carriers to Indonesia.

Who's to Blame?

According to the authoratative Indonesia Digest, the underlying cause of Indonesia's energy crisis is the fact that Indonesian refineries are only able to meet 70% of domestic energy demand with the remainder imported at costs approaching US$70 per barrel for refined fuel oils.

Quoting the Chairman of the Oil and Gas Distributors Association, M. Nur Adib, Indonesia Digest says supplies to distributors at gas pumps across Indonesia are now down 30%, despite assurances from Pertamina that reserve stocks stand at a relatively safe 17-18 days.

While finger-pointing continues to occupy much of the time of Pertamina and Finance Ministry officials, the ongoing situation represents a very real threat the nation's infrastructure and the day-to-day operation of the National economy.