Fossil Fuels – At What Cost?

The report identifies three primary upstream producer subsidies in Indonesia with a combined estimated value of US$ 1.799 billion in 2008. The largest is the Oil Domestic Market Obligation (DMO), which provides a US$ 1.554 billion subsidy to Pertamina's refineries by requiring producers to sell crude oil at discounted prices. Other quantified subsidies include tax incentives for imported goods and services (US$ 130 million) and an investment credit allowance (US$ 115 million). While these incentives are noted to support the government's goal of increasing exploration in new geological plays, the report highlights a steady decline in national oil production and discovery of new reserves since 1996. The study also identifies several potential subsidies requiring further research, such as preferential access to forested areas and expired Production Sharing Contracts (PSCs).

• In 2008, the total estimated value of identified upstream producer subsidies in Indonesia was US$ 1.799 billion, comprising the Oil Domestic Market Obligation (DMO), tax incentives for imports, and investment credit allowances.
• The Oil Domestic Market Obligation (DMO) functions as a subsidy for Pertamina's refineries, valued at US$ 1.554 billion in 2008, because producers are required to sell crude oil at heavily discounted prices while Pertamina is reimbursed by the government based on market prices.
• Tax incentives for imported goods and services, including exemptions from Import Duty and Value Added Tax (VAT), provided a subsidy estimated at US$ 130 million in 2008.
• The Investment Credit Allowance, designed to encourage the development of new fields and geological plays, was estimated at a net value of US$ 115 million in 2008.
• Despite these subsidies, Indonesia has experienced a steady decline in annual oil production since 1996 at an average rate of approximately 4.5%.
• Investment in exploration has decreased significantly, falling from approximately 10% of total annual work program expenditure to just 5% in recent years, contributing to a decline in the discovery of new oil reserves.
• The report identifies several areas where subsidies may exist but require further research for quantification, including bank financing support for projects with below-standard internal rates of return (IRR), and preferential access to forested areas and expired PSCs for Pertamina and regional business entities (BUMDs).
• Certain activities were explicitly judged to not involve subsidies, including the restoration and rehabilitation of depleted fields, bonuses paid by industry, and the year-end reconciliation of overlifting and underlifting.

APA

Braithwaite, D., Soelaiman, S., Wiroyudo, G. K., Trimurdadi, H., Soeleman, S., Utomo, S. P., & Rakhmanto, P. A. (2010). Fossil Fuels – At What Cost? International Institute for Sustainable Development. https://www.iisd.org/system/files/2020-12/ffs_awc_indonesia.pdf

Chicago

Braithwaite, David, Soepraptono Soelaiman, Gatot K Wiroyudo, Herucokro Trimurdadi, Sugiharto Soeleman, Sutadi Pudjo Utomo, and Pri Agung Rakhmanto. Fossil Fuels – At What Cost? International Institute for Sustainable Development, 2010. https://www.iisd.org/system/files/2020-12/ffs_awc_indonesia.pdf.

Wikipedia

{{cite report |last1=Braithwaite |first1=David |last2=Soelaiman |first2=Soepraptono |last3=Wiroyudo |first3=Gatot K |last4=Trimurdadi |first4=Herucokro |last5=Soeleman |first5=Sugiharto |last6=Utomo |first6=Sutadi Pudjo |last7=Rakhmanto |first7=Pri Agung |title=Fossil Fuels – At What Cost? |publisher=International Institute for Sustainable Development |date=October 2010 |url=https://www.iisd.org/system/files/2020-12/ffs_awc_indonesia.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{braithwaite2010fossil, author = {Braithwaite, David and Soelaiman, Soepraptono and Wiroyudo, Gatot K and Trimurdadi, Herucokro and Soeleman, Sugiharto and Utomo, Sutadi Pudjo and Rakhmanto, Pri Agung}, title = {{Fossil Fuels – At What Cost?}}, institution = {International Institute for Sustainable Development}, year = {2010}, month = oct, url = {https://www.iisd.org/system/files/2020-12/ffs_awc_indonesia.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }