Energy Subsidies in 2022 Swelled, 2023 Will Get Worse?

Electricity supply from PLN

It seems that the government is still burdened with the additional subsidy in the energy sector. The realization of energy subsidies and compensation in 2022 swelled to IDR 551.2 trillion. The national energy sector is even predicted to still burden the state finances in 2023.

This was conveyed by the Minister of Energy and Mineral Resources (ESDM), Arifin Tasrif. He confirmed that subsidies for the energy sector in 2023 are expected to increase again.

The main cause of the swelling energy financing still comes from the war conflict between Russia and Ukraine.

Arifin, in a Press Conference at the Office of the Ministry of Energy and Mineral Resources, Monday (30/1/2023), explained that estimates of a large number of subsidy allocations in 2023 are still due to the feud between the two countries. The war between Russia and Ukraine caused a major supply block from Russia.

Furthermore, apart from the war factor, the increase in energy subsidies is also due to the increasing supply demands from several other countries, such as China.

“On the one hand, supply is decreasing because it is not certain that supply can be caught up by producing countries. Meanwhile, on the other hand, the demand is increasing,” said Minister Arifin.

As is known, national energy subsidies are one of the “burdens” of state finances. This is because the Ministry of Finance (Kemenkeu) noted that the realization of energy subsidies and compensation in 2022 had swollen to IDR 551.2 trillion. The subsidy is equivalent to 17.9% of total state spending last year.

As if it were an endless problem, the government is also confused about the performance of Indonesian oil wells which are showing a downward trend. This will of course have an impact on Indonesia’s oil-lifting production in the coming years.

Arifin Tasrif said that the performance of oil wells in Indonesia is in a downward trend. This is because the existing wells are mature or old.

The Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) noted that the realization of crude oil lifted in 2022 was recorded at 612,300 barrels of oil per day (bopd) or lower than the achievement of oil lifting in 2021, which reached 660,300 bopd.

The realization of oil lifting in 2022, (reached 612,300 bopd) also did not reach the 2022 target, which was set to reach 703,000 bopd.

The decline in the performance of Indonesia’s oil wells has not made ESDM lower its target either. Arifin targets that this year, Indonesia’s crude oil lifting will reach 660,000 barrels per day.