Oil and gas draft law draws mixed reactions<\/p>\n
JAKARTA (JP): The oil and gas draft law which will lift the
\ndecades-long monopoly held by state oil and gas company Pertamina
\nhas received a mixed reaction from analysts.<\/p>\n
Analyst Bachrawi Sanusi said the bill, which is awaiting
\napproval by the House of Representatives, contained a number of
\nweaknesses and the House should reject it.<\/p>\n
\"A monopoly is not bad as long as it is held by state
\ncompanies, which differ from private companies in that they
\nprioritize the public's interests over profits,\" he told The
\nJakarta Post.<\/p>\n
He proposed the existing 1971 law on Pertamina remain in
\neffect, with several modifications to promote the company's
\nindependence from the bureaucracy and to provide it with enough
\nfunds to finance its upstream activities.<\/p>\n
He said the rampant corruption which tainted Pertamina's image
\nover the past several decades was caused by the interference of
\ngovernment officials in the company's business.<\/p>\n
He also said Pertamina performed poorly in its core business
\n-- exploration and production -- because it lacked financing,
\nwith most of the country's oil and gas revenues being taken by
\nthe government.<\/p>\n
He added that the government also obliged the company to
\nhandle several unprofitable businesses for the benefit of the
\npublic.<\/p>\n
T.N. Machmud, a lecturer at the University of Indonesia,
\nhowever, praised the bill as \"a breakthrough\" which would give
\nPertamina the chance to compete against foreign oil and gas
\ncompanies.<\/p>\n
\"The bottom line of the bill, which I am in favor of, is that
\na monopoly is always bad and competition will improve quality,\"
\nMachmud told the Post.<\/p>\n
Machmud agreed with Bachrawi that the main reason behind
\nPertamina's poor performance over the past several decades was
\nthe government's interference in the company's business.<\/p>\n
\"With the bill, Kuntoro wants to keep the government out of
\nPertamina and let it concentrate in its core business,\" he said.<\/p>\n
Machmud said Pertamina accounted for 10 percent of the
\ncountry's oil output of 1.5 million barrels of oil per day (bpd)
\nin 1975. Today, the country's oil output remains at 1.5 million
\nbpd, but Pertamina's contribution has dropped to less than 4
\npercent.<\/p>\n
In comparison, Malaysia's state oil and gas company, which
\nbegan operations much later than Pertamina, currently accounts
\nfor 30 percent of the country's oil output. The company has also
\ninvested in dozens of countries across the world, he said.<\/p>\n
The new oil and gas bill will also open the downstream sector,
\nwhich is currently monopolized by Pertamina, to private
\ninvestment. Private investors will be free to develop their own
\nrefineries and retail their products in the country.<\/p>\n
Bachrawi believes that fuel distribution, which has remained
\nsecure and stable under Pertamina's control, will be jeopardized
\nunder the free market system.<\/p>\n
\"Do you think private refineries, which only look for profits,
\nwill be willing to sell their fuel in unprofitable locations like
\nIrian Jaya? Do you think private companies will be willing to
\nproduce fuel amid the depressed oil prices,\" Bachrawi asked.<\/p>\n
\"Trust me, if the free market system is introduced, we shall
\noften experience fuel shortages,\" he said.<\/p>\n
The bill, a copy of which was made available to the Post on
\nMonday, will also allow oil and gas companies to choose a
\ncontract other than a production sharing contract (PSC), which is
\ncurrently obligatory, for their operations.<\/p>\n
Bachrawi and Machmud believe that oil and gas companies will
\nchoose a type of contract which will allow them to operate
\nindependently, rather than a PSC which gives Pertamina the right
\nto manage contractors.<\/p>\n
Bachrawi proposed that PSCs remain obligatory.<\/p>\n
Machmud said the PSC system, which was first introduced in
\nIndonesia and had been copied by many countries, was not a bad
\nsystem, but investors complained about Pertamina's \"heavy-handed\"
\nmanagement.<\/p>\n
\"The PSC system is good, but its implementation needs some
\nchanges,\" Machmud said.<\/p>\n
Machmud, however, said that he had no reservations with
\nallowing oil and gas companies to choose other types of contracts
\nother than a PSC, as long as \"we are able to lure investments and
\ndelay our country's becoming a net oil importer.\" (jsk)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/oil-and-gas-draft-law-draws-mixed-reactions-1447893297",
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