Indonesia and Russia are in talks on boosting cooperation, including through the long-term supply of Russian crude to the Asian nation, media have reported, following a meeting between the presidents of the two countries earlier this week.
Reports cited Indonesia’s energy and mineral resources minister as confirming the country will be buying more Russian crude as well as liquefied petroleum gas. The confirmation came after a meeting between Indonesia’s top energy official and his Russian counterpart.
Indonesia produces some 600,000 barrels of crude oil daily, but its consumptions far above that, at around 1.6 million barrels daily, the Business Times noted in a report on the news. A lot of what Indonesia imports in crude comes from the Middle East. What’s more, Indonesia only has very limited oil in stock, enough to cover just 21 to 23 days of consumption, the Business Times noted.
“Indonesia’s strategy to diversify its crude import basket with imports from Russia is backed by supply economics, refinery compatibility and medium-term energy security logic, not just opportunism around the Middle East crisis,” Rystad Energy analyst Prateek Panday told the publication.
“Indonesia is trying to reduce its exposure to a single cluster of risk, particularly the Middle East, which is highly sensitive to escalation along key routes such as the Strait of Hormuz,” an analyst from the Indonesia Strategic and Economics Action Institution, told the Business Times.
The approach is likely to become quite popular across Asia, which is heavily dependent on Middle Eastern oil supply. The urgency to replace lost barrels from the top-producing region could intensify in the coming days and weeks as the U.S. blockade on Iranian oil exports adds pressure to the global oil supply environment. Russia is an obvious choice due to its relative proximity. Indeed, after the U.S. lifted sanctions on Russian crude in floating storage, purchases have soared, leading to a decline in these volumes of some 60 million barrels, according to Vortexa.
By Irina Slav for Oilprice.com
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