Indonesia Considers Russian Crude as Domestic Production Falls

Former OPEC member Indonesia is looking to buy Russian crude for the first time in more than a decade according to anonymous sources that spoke with Reuters.

Indonesia’s Pertamina hasn’t bought any crude oil from Russia following its invasion of Ukraine in February 2022 but has now added Sokol and Urals grade crude oil to its tender list for purchase in September 2024. According to Reuters, the last time that the Indonesian oil company bought Sokol crude was more than 10 years ago.

Whether Indonesia joins China and India as buyers of Russian crude remains to be seen. Reuters reports that one of the tenders reportedly closed last week and another on Monday, with the results yet to be announced.

Indonesia has seen strong economic growth in 2024, trailing just Vietnam and the Philippines. This year, Indonesia’s domestic production of crude oil has fallen to below 600,000 bpd, while its consumption has increased to more than 1.6 million bpd.

Despite its relatively neutral stance in global politics, Indonesia announced in 2022 that it would be looking into buying cheap Russian crude, but the Widodo government apparently concluded that purchasing Russian crude at a 30% discount compared to Brent prices was not worth the associated risks.

Increased oil imports are taking their toll on Indonesia’s trade balance, with crude and petroleum product imports increasing 17 percent month on month in June 2024. Higher prices for both crude oil and petroleum products are also impacting the country’s trade balance. The Star reports that the value of oil imports in June 2024 was up 47% year-on-year on the back of higher volumes and prices.

Despite the opportunity to buy discounted Russian barrels, Indonesia’s oil refineries are largely geared toward processing light crude oil, most of which is supplied by countries such as Saudi Arabia, Nigeria, Angola and Iraq.

By Tom Kool for Oilprice.com

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