Azernews.Az

By Gulgiz Dadashova

Azerbaijan is offering Indonesia to participate in upstream oil and gas development in the Caspian Sea.

Indonesian Minister of Energy and Mineral Resources Sudirman Said said about it in an interview with AzerNews in Baku.

The Indonesian delegation was on a one-day visit to Baku on June 5 to mull energy cooperation and consider opportunities for the joint work. During the Baku visit, the delegation headed by Sudirman Said met with President Ilham Aliyev, Energy Minister Natig Aliyev and Head of Azerbaijan’s state energy company SOCAR Rovnag Abdullayev.

The Azerbaijani minister noted that Indonesia can benefit from his country's “rich experience” in oil refining, exploration.

The sides signed a joint statement, under which Indonesia and Azerbaijan agreed to appoint persons in charge from both parties to meet and go for detail of the agreement.

“I think it is comprehensive document that can be a base for next follow-up meeting,” the minister said while commenting on the document.

Noting that the main discussions touched the way to strengthen the relationship between the two countries in terms of energy development, the minister said good opportunities exist to expand energy, economic ties between Azerbaijan and Indonesia.

“We have a lot of opportunities to work together, especially in developing the infrastructure in Indonesia. We also talked about the possibility of developing power sector in Indonesia. We are now growing so fast and we need more 35 GW electricity in the next 5 years. Thus we need strong partners in terms of technology, financing and energy developing,” the minister said.

Southeast Asia’s largest energy producer and consumer Indonesia's total primary energy consumption grew by 44 percent between 2002 and 2012. Indonesia's population of 242 million is served by power generation capacity of only 35 GWe, producing 196 billion kWh in 2012. Of this, 95 TWh came from brown coal, 33 TWh from oil, 45.5 TWh from gas, 13 TWh from hydro and 9 TWh from geothermal. 36 percent of the population in 2013 has no access to electricity, according to World Nuclear Association.

New areas for cooperation

Said emphasized that Indonesia, in turn, may offer new market for Azerbaijan, which has huge oil and gas reserves.

Although the minister noted that no specific projects were on table, a number of possibilities were discussed in Baku.

Indonesia, Said said, is open for developing storage capacity for fuel and developing refineries, “as we need huge number of refining capacity”.

“We are also open for power sector development, including gas turbine construction. That is something that we will need to discuss in the near future when the above mentioned team meets,” the minister said.

The minister also positively assessed opportunity of Azerbaijan and Indonesia to work jointly in third countries.

“Crude not always matches between the need and the available capacity in terms of quality and specifications. So we may involve Iraq or Iran, which is concisely we had talked with them during the recent OPEC meeting in Vienna.”

Oil imports

Crude oil constitutes the biggest part of Indonesia’s import from Azerbaijan. The South Caucasus country emerged as the second biggest supplier of crude oil to Indonesia in 2011 after Saudi Arabia.

Characterizing the current volumes of Azerbaijan’s oil supply to Indonesia, the minister said the figure is very dynamic.

“The fact is that we can produce only 800,000 barrels of oil per day, while the consumption is 1.5 million barrel. So, there is a pretty much gap between the two figures. So far among non-OPEC countries we import about thirty percent of oil from Azerbaijan,” he said noting that oil imports from Azerbaijan hits 300,000 bpd.

The Indonesian government earlier announced that it is planning to increase oil imports through direct purchase from producers and Iran is one of the options for this purpose

The minister noted that before visiting Baku he had talks in Iran. The talks in Tehran were mainly linked with oil imports.

“I believe the partnership among the countries is important,” the minister said commenting on his Tehran visit. “We will have kind of mutual benefit among the countries, including Iran, Iraq and even Kuwait. Because, relying on one source is not good. I think we have to build multiple sources. And the synergy among the Muslim countries is also very strategic, as Indonesia is home to large number of Muslim people.”

In recent years, the former member of OPEC-Indonesia has seen its crude oil consumption grow and reach around 1.6 million barrel per day (bpd), while its national output stands below 800,000 bpd. Increase in domestic consumption is the most important element to turn the biggest oil producer in Southeast Asia region to an importer. Considering the high cost of exploitation and production of oil in Indonesia, experts predict that the country will provide 90 percent of its oil consumption from import.

Energy prices

Asked about his expectations on future of oil prices, the minister stressed that Indonesia, as the importer side, is interested in oil prices.

“But at the end of the day, everybody will come to the point that everybody feels the dispersal among the producing countries and the consuming countries. That is the spirit of OPEC. I think in OPEC they will come to equitable price,” he noted.

The minister, who was among the participants of recent OPEC meeting in Vienna, believes the “technology, supply and demand market and geopolitical situation will determine what is the equity and hopefully everybody will be happy at the end of the day”.

Brent crude slumped almost 50 percent in 2014. OPEC, which supplies about 40 percent of the world’s oil, kept its output quota at 30 million barrels a day at a June 5 meeting in Vienna, choosing to defend market share and force higher-cost producers such as U.S. shale companies to slow drilling.

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