Factors beyond Pertamina affecting fuel supply<\/p>\n
By Rikza Abdullah<\/p>\n
JAKARTA (JP): The recent gasoline shortage here, the first of
\nits kind in 30 years, made the public wonder if there might be
\nsomething wrong with the country's fuel distribution system.<\/p>\n
The shortage, which also affected East Java and Bali, was said
\nto be linked with the shutdown of the Balongan oil refinery in
\nWest Java, which has a processing capacity of 125,000 barrels of
\ncrude oil per day (bpd).<\/p>\n
An explosion at a processing unit in Balikpapan last Monday
\nfueled fears of another possible shortage on the domestic market.
\nThe refinery in the East Kalimantan town has a capacity of
\n260,000 bpd.<\/p>\n
Some, including Minister of Mines and Energy Susilo Bambang
\nYudhoyono, have blamed Pertamina, the state-owned oil and gas
\ncompany given a monopoly over the petroleum industry in the
\ncountry, for the shortage.<\/p>\n
But a former Pertamina director for domestic supplies and
\ndistribution, Nusirwan Sutan Assin, said the shortage stemmed
\nfrom nontechnical factors which were beyond the authority of the
\ncompany.<\/p>\n
Sutan, who is now a deputy rector for human resources
\ndevelopment at Trisakti University in Jakarta, talked to The
\nJakarta Post last Tuesday and explained why the country,
\nparticularly the capital, is prone to fuel supply shortages.<\/p>\n
Question: What was the cause of the gasoline shortage that
\nrecently hit Jakarta, a most politically sensitive city?<\/p>\n
Sutan: The gasoline shortage was caused by the shutdown of the
\nBalongan refinery, on whose supplies Jakarta and its surrounding
\nareas depend very much (for about 70 percent to 80 percent of
\nfuel supplies). The refinery stopped operations on June 20 and
\nresumed production on July 25. Jakarta and its surrounding areas
\ndid not suffer a shortage of fuel as soon as the shutdown
\noccurred, apparently because tankers usually destined for East
\nJava were diverted to Jakarta. That was why East Java was hit by
\na fuel supply shortage before Jakarta was finally affected on
\nJuly 23.<\/p>\n
Why couldn't other refineries or imported gasoline temporarily
\nprovide adequate fuel supplies for Jakarta?<\/p>\n
Because congestion at the Tanjung Priok oil harbor in North
\nJakarta limited the speed of the flow of oil fuel from tankers to
\nPertamina's nearby oil terminal at Plumpang.<\/p>\n
To what extent can the Balongan refinery be relied upon?<\/p>\n
The refinery has apparently not been designed as a reliable
\nplant. For example, it is supported by only one big compressor,
\ninstead of two or three smaller compressors. The transportation
\nof products from one processing unit to another is carried out by
\none-line pipes, instead of three-line pipes. That means that
\nwhenever there is something wrong with the compressor or with the
\npipes, the refinery will have to stop operation.<\/p>\n
How is it that Jakarta and its surrounding areas are so
\ndependent on an unreliable refinery?<\/p>\n
That was caused by nontechnical factors that were beyond the
\nauthority of Pertamina.<\/p>\n
Could you elaborate?<\/p>\n
Pertamina, widely known as the state oil monopoly, is actually
\njust an \"executor\" of the government's policy in the oil
\nindustry. The company is assigned, among other things, to manage
\nthe domestic fuel supply and distribution but the government does
\nnot give it freedom in its operations.<\/p>\n
These are things like determining the level of national fuel
\nstocks, purchasing crude oil that is technically appropriate for
\nits refineries, transporting oil fuel from refineries to around
\n150 depots throughout the country, coordinating the distribution
\nof different fuels to all types of its customers (individuals,
\ncooperatives and companies), setting the prices of its products.<\/p>\n
And even determining the costs of its operational activities.<\/p>\n
What about the nontechnical factors?<\/p>\n
Pertamina is expected to prepare the planning of its
\nactivities but they must get approval first from the government
\nand the board of commissioners before implementing the plans. The
\nboard consists of five ministers and is chaired by the minister
\nof mines and energy.<\/p>\n
When I was a director for domestic supplies and distribution
\nfrom 1986 to 1989, Pertamina proposed to the government that to
\nimprove the security of fuel supplies throughout Java, a new
\nrefinery should be established in East Java where increasing fuel
\ndemand justified this step.<\/p>\n
To facilitate the smooth transportation of the fuel, a
\npipeline would have to be built between the proposed refinery and
\nYogyakarta, where an oil depot was in operation with the fuel
\nbeing supplied by a 300,000 bpd refinery in Cilacap, Central
\nJava.<\/p>\n
Because a pipeline network between the Cilacap refinery and
\nBandung, through Melambong, West Java, was also operational,
\nanother new pipeline should have been established between Jakarta
\nand Melambong through Balongan in Cirebon.<\/p>\n
Such an interconnected pipeline network would guarantee zero
\nrisk for fuel supplies throughout Java. But unfortunately, the
\nproposal was turned down by the government.<\/p>\n
What happened then?<\/p>\n
In 1989, instead of building a refinery in East Java, then
\nminister of mines and energy Ginandjar Kartasasmita made a
\ndecision on the construction of the Balongan refinery, equipped
\nwith a pipeline leading to the Plumpang oil depot in North
\nJakarta.<\/p>\n
Because a pipeline has not been built between Balongan and the
\nCilacap-Bandung pipeline, the two refineries in Balongan and
\nCilacap are not interconnected and they, therefore, cannot
\nsupport each other whenever any supply problems occur at one of
\nthem. East Java has also been left vulnerable to supply
\nshortages.<\/p>\n
Why didn't the government grant Pertamina's request for the
\nestablishment of the Balongan-Melambong pipeline?<\/p>\n
I don't know exactly but I think we can guess the reason. As
\nsoon as the proposed pipeline was established, a number of
\ntankers which were then transporting oil fuel from Cilacap and
\nother refineries to Jakarta would have lost their jobs.<\/p>\n
Who operated the tankers?<\/p>\n
Companies belonging to the children of then president
\nSoeharto.<\/p>\n
Why didn't Pertamina ask them to build the proposed Balongan-
\nMelambong pipeline, as they built the existing pipelines?<\/p>\n
I don't know. But the facts show that it has not been built.<\/p>\n
Why didn't Pertamina cooperate with multinational oil
\ncompanies in supplying fuel by exchanging products, so quick
\ndeliveries could be made at favorable prices?<\/p>\n
Pertamina used to have long-term contracts with big oil
\ncompanies like Shell, Caltex and Mobil for the exchange of
\nproducts with deliveries to be made whenever needed. But in the
\nearly 1980s, the contracts were terminated because the president
\ninstructed Pertamina to assign Permindo, a company belonging to
\nthe first family, to become its sales and purchasing agent. From
\nthat time on, Pertamina had to buy oil products at higher prices
\nand sell its products at lower prices.<\/p>\n
Do the government's policies affect the security of domestic
\nfuel supplies?<\/p>\n
Some of the policies affect the quality of supplies, at the
\nleast.<\/p>\n
Because the government subsidizes the domestic utilization of
\noil fuel, it determines the costs for everything, including the
\ncost for the transportation of fuel from depots to gas stations.
\nSince the transportation cost is too small, privately owned
\ntransportation companies are trying to blend gasoline with
\nkerosene, which is far cheaper, on the way between depots and gas
\nstations.<\/p>\n
Owners of gas stations, which are given a discount of only 4
\npercent of sale prices, are also encouraged to modify their
\nmeters down so they can finance their overhead costs and recover
\ntheir investments.<\/p>\n
There is talk that Pertamina must send its export revenue to
\nBank Indonesia immediately and prefinance all the costs of its
\nactivities; but on the other hand it has to wait for up to six
\nmonths if it claims for the difference between its sales revenue
\nand its production costs, usually known as subsidies. Does this
\naffect Pertamina's operation?<\/p>\n
Of course. The company, for example, sometimes finds
\ndifficulty paying for its imports because, as a consequence of
\nthe fact that its export revenue goes directly to Bank Indonesia,
\nit cannot open a letter of credit by itself.<\/p>\n
Will the recent explosion at a processing unit at the
\nBalikpapan refinery affect the security of domestic fuel
\nsupplies?<\/p>\n
I think its impact will be small because the refinery's
\nproduction decreased by only about 20,000 bpd after the
\nexplosion.<\/p>\n
How can Pertamina improve the security of its fuel supplies in
\nJava?<\/p>\n
First, it must construct a pipeline between Balongan and
\nMelambong to interconnect the pipeline system between the two
\nrefineries in Balongan and Cilacap. The construction of the
\nproposed Balongan-Melambong pipeline, the best short-term
\nalternative to secure fuel supplies in Jakarta and its
\nsurrounding areas, can be finished in less than two years.<\/p>\n
Second, a fuel terminal should be built in Cikampek, West
\nJava, to reduce the burden on the Plumpang terminal in North
\nJakarta and to reduce transportation costs for distribution in
\nthe West Java town of Purwakarta and its surrounding areas.<\/p>\n
Third, a new refinery can also be built in East Java with a
\npipeline network interconnected with the existing pipeline in
\nYogyakarta.<\/p>",
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