Liberalizing petroleum market<\/p>\n
Law No.22\/2001 on oil and natural gas will end on Oct. 23
\nstate firm Pertamina's monopoly in importing and distributing
\npetroleum products in Indonesia, but do not expect foreign
\ngasoline stations to be a common sight along the country's
\nhighways any time soon.<\/p>\n
Even though Indonesian consumers will be best served by
\nopening the market to all types of companies -- marketing firms
\nthat buy products locally or import processed or partially
\nprocessed petroleum products and the ones that produce elsewhere
\nor purchase oil from Indonesian reserves -- Pertamina will
\ncontinue to hold a dominant position in the distribution of final
\npetroleum products.<\/p>\n
First of all, Pertamina already has physical assets in place,
\nhas enjoyed a long lead time in the market and has accumulated
\nextensive market knowledge. The state company still monopolizes
\ndomestic refining at least until the few domestic and foreign
\ninvestors already licensed to build oil refineries complete their
\nprojects within the next three to four years. And more important
\nfor distribution and marketing is that Pertamina still controls
\nbulk petroleum handling and storage facilities.<\/p>\n
Moreover, as long as the government-fixed prices of domestic
\nfuels remain below international prices, the bulk of oil fuels
\nsold in the country will remain regulated (subsidized). We reckon
\ntherefore that Pertamina, given its extensive distribution
\nnetworks and storage facilities throughout the country, will
\ncontinue to be entrusted to manage the distribution of subsidized
\nfuels. This factor alone would give the state company a powerful
\ncompetitive advantage in the domestic market.<\/p>\n
The government has issued licenses to more than 35 domestic
\nand foreign companies to operate either in petroleum refining,
\nstorage or wholesale and retail, but it will take two to three
\nyears for them to develop their own marketing infrastructure,
\nwithout which they will not be able to make any significant
\ninroad to the domestic market.<\/p>\n
Hence, we think the rush to obtain the refining and marketing
\nlicenses constitutes more a quick response to grab the
\nopportunity and to get in while the door remains open. Thus far,
\nonly Shell Plc has opened the first foreign gas station in Lippo
\nKarawaci, a suburb of Jakarta, while another foreign investor --
\nMalaysia's Petronas -- is still building its first gas station in
\nCibubur near Bogor. Compare this to the more than 2,860 stations
\nalready operated by Pertamina throughout the country.<\/p>\n
The foreign investors, notably such major integrated
\npetroleum companies as Shell, Petronas, Total, Beyond Petroleum,
\nExxonMobil and Petrochina, which have extended experience in the
\nupstream oil industry in Indonesian exploration and production of
\ncrude oil, have a long-term objective for their investment
\nprograms in downstream petroleum activities. They are quite
\nright, in view of Indonesia's big market potential of more than
\n220 people.<\/p>\n
One should also realize that the petroleum market is not a
\nsingle market, but a variety of specialized product and service
\nmarkets. The market for final petroleum products encompasses a
\nlarge variety of products, each with its own handling and market
\ncharacteristics. For fuels, the market includes a large range of
\nproducts, including various grades of gasoline (regular gasoline
\nand those with high octane), diesel fuels, distillates, jets and
\nbunker fuel.<\/p>\n
Similarly there is a varied market for lubricants that require
\nhundred of different products ranging from motor oils to
\nlubricants with special properties, and wholesale and retail
\nsales of petroleum products are primarily a service industry. The
\nvalue added is derived from delivering the specific quantity and
\nquality of products at the right place and time and on a reliable
\nschedule. It may also involve providing complementary products or
\nservices that increase value to consumers. All this offers wide,
\ngrowing opportunities for new investors.<\/p>\n
Even though it will be some time before foreign gasoline
\nretailers are able to establish many gas stations in the country,
\nconsumers will still benefit greatly because Pertamina, with the
\nforeign competition looming over its head, will feel compelled to
\nimprove its services, otherwise it will gradually lose its
\ncustomers.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/liberalizing-petroleum-market-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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