Pertamina to lose downstream monopoly<\/p>\n
JAKARTA (JP): Minister of Mines and Energy Kuntoro
\nMangkusubroto said yesterday the government is preparing a bill
\nto end the monopoly of the state oil and gas company Pertamina in
\ndomestic oil and gas refining, fuel distribution, and marketing.<\/p>\n
Kuntoro said the draft law on oil and gas, which is to be
\nsubmitted to the House of Representatives next month, would open
\nthe oil and gas downstream sector to private companies.<\/p>\n
Pertamina currently holds a monopoly on oil and gas refining,
\nfuel distribution and marketing under 1971 law No. 10 on
\nPertamina.<\/p>\n
The new law will eliminate all the privileges given to the
\nstate oil and gas company and will change the company's status
\ninto a limited company.<\/p>\n
\"Free competition will boost efficiency and in turn lower the
\nprice of the commodities,\" Kuntoro said.<\/p>\n
He added the law was also aimed at making Pertamina an
\nefficient and profitable company.<\/p>\n
He did not, however, specify when the law might be implemented
\nbut Indonesia, as a member of the Association of Southeast Asian
\nNations (ASEAN), should open its oil and gas downstream sector by
\n2003 under the ASEAN Free Trade Area (AFTA) scheme.<\/p>\n
The government first eased the monopoly in the early 1990s by
\nallowing private firms to develop refineries in the country.<\/p>\n
But the move failed to attract investors since the government
\nmaintained Pertamina's monopoly on fuel marketing and
\ndistribution in the domestic market. The private refineries were
\nforced to export their products.<\/p>\n
The government further tried to encourage private investment
\nin 1997 by allowing private refineries to market their products
\ndomestically through Pertamina.<\/p>\n
The policy encouraged dozens of companies to attempt to take
\nadvantage of the change but only companies associated with ex-
\npresident Soeharto were given approval to build refineries under
\nthe new scheme.<\/p>\n
The companies included PT Asia Pacific Petroleum Refinery
\nIndonesia, partly owned by ex-President Soeharto's son Bambang
\nTrihatmodjo, which planned to build a US$3.2 billion refinery in
\nSitubondo, East Java; PT Buana Ganda Perkasa, partly owned by
\nSoeharto's half brother Probosutedjo, which planned to set up its
\n$3.5 billion plant in Probolinggo, East Java; and PT Pusat Minyak
\nIndonesia Timur, partly owned by Soeharto's close friend Mohammad
\n\"Bob\" Hasan, which planned to build a $1.25 billion plant in
\nLombok.<\/p>\n
However, the monetary crisis which has been sweeping through
\nthe region from mid-last year has forced them to put the projects
\non hold.<\/p>\n
Indonesia consumes 52 million kiloliters or 325 million
\nbarrels of fuel per annum, between 15 percent and 20 percent of
\nwhich are imported due to the limited capacity of Pertamina's
\nrefineries.<\/p>\n
Some analysts say the proposed law won't attract investors to
\nenter the domestic market given the fact that domestic fuel
\nprices are much lower than world market prices due to the huge
\ngovernment subsidies.<\/p>\n
They say investors will enter the domestic market only if the
\nsubsidies are eliminated and fuel prices are determined by the
\nmarket, instead of the government.<\/p>\n
Under the newly announced revised state budget for 1998\/1999,
\nthe government is to provide fuel subsidies amounting to Rp 27.5
\ntrillion, or $2.6 billion on an assumed exchange rate of Rp
\n10,600 per dollar.<\/p>\n
Kuntoro however denied such speculation, saying the government
\ncould still determine fuel prices for the next few years but that
\nit would attract investors by incorporating fuel subsidies into
\nthe open bidding process.<\/p>\n
\"Companies which ask for the lowest subsidies will be given
\nthe go-ahead to market their products in the country while
\nenjoying some assistance from the government,\" he said. (jsk)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/pertamina-to-lose-downstream-monopoly-1447893297",
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