Pertamina will still dominate downstream sector: Experts<\/p>\n
Dadan Wijaksana, The Jakarta Post, Jakarta<\/p>\n
State-owned oil and gas company Pertamina can continue to
\ndominate the country's downstream sector even when new players
\nenter the market in 2005 to benefit from the planned
\nliberalization of the sector, experts said.<\/p>\n
Expert Kurtubi and legislator Agusman Effendi shared the view
\nthat Pertamina had everything necessary to compete with any
\nnewcomers. They said that with its facilities and infrastructure,
\nPertamina could produce and deliver the products at highly
\ncompetitive prices.<\/p>\n
\"Pertamina is ready. By my calculations, I do not think there
\nis one single player, no matter how big it is, that can compete
\nhead-on with Pertamina in the country's downstream sector,\"
\nKurtubi told The Jakarta Post on Monday.<\/p>\n
With its supporting infrastructure, he said, Pertamina could
\nreap profits by setting its fuel prices slightly above the
\nproduction cost, which would still be way below the market price.<\/p>\n
\"At that level, no companies will be able to compete because
\nthey will be experiencing losses,\" he said.<\/p>\n
Agusman, deputy chairman of House of Representatives
\nCommission VIII for energy affairs, also saw no problems for
\nPertamina in the downstream sector even with the arrival of new
\ncompetitors.<\/p>\n
\"Pertamina has more than 20 years of experience in the sector.
\nThey have also a strong infrastructure, so there is no reason
\nthey will be left out once the new players come in,\" Agusman told
\nthe Post.<\/p>\n
\"The challenge for Pertamina is how to aggressively improve
\nits efficiency to better compete.\"<\/p>\n
The two were commenting on plans by various foreign companies
\nto enter the downstream sector -- covering crude processing
\nactivities, gasoline and fuel transportation, storage and
\nmarketing -- which will be liberalized by 2005 as mandated by Law
\nNo. 22\/2001 on oil and gas. The move will put an end to
\nPertamina's decades-long monopoly in distributing fuel across the
\ncountry.<\/p>\n
While major names such as ConocoPhillips and ChevronTexaco's
\nCaltex are reported to have made plans to enter the sector,
\nMalaysia's state oil and gas giant Petroliam Nasional Berhad
\n(Petronas) has moved a step ahead of them.<\/p>\n
Petronas, already a player in the upstream sector here, said
\non Sunday it would market its two brands of lubricants through a
\nlocal unit, PT Petronas Niaga Indonesia, with other lubricant
\nbrands to follow.<\/p>\n
It also said it would spend US$100 million a year to develop
\nits downstream business in Indonesia, which would include
\nbuilding and operating gasoline pumps.<\/p>\n
Both Kurtubi and Agusman warned that Pertamina's competitive
\nedge could be significantly hurt if the government sold several
\nrefineries being operated by Pertamina.<\/p>\n
\"If the plan (to sell refineries) is realized, Pertamina will
\nhave to shoulder much more expensive costs. In another words, it
\nwould destroy Pertamina ...,\" he said.<\/p>\n
The sale of a number of refineries currently operated by
\nPertamina to foreign investors was proposed by the World Bank
\nlast year. The bank said the move would create a more competitive
\nenvironment in the downstream sector.<\/p>\n
It said that unless the government took over some of the
\nrefineries and sold them to other companies, it would be very
\ndifficult for any new players to overcome Pertamina's domination
\nof the sector. If Pertamina maintained control of all the
\nrefineries, no investors would be willing to enter the sector,
\nthe bank said.<\/p>\n
Under the World Bank's proposal, Pertamina would be allowed to
\nkeep only three refineries in Balikpapan, East Kalimantan;
\nBalongan, West Java; and Musi, South Sumatra. Six others
\nrefineries would be sold.<\/p>\n
The bank said that of the nine refineries currently operated
\nby Pertamina, only two, including Balongan, belonged to the
\ncompany, and that the others were built with state funds.<\/p>\n
List of RI's refineries
\n-----------------------------------
\nName Capacity<\/p>\n
(barrels per day)
\n-----------------------------------
\nCilacap 388,000
\nBalikpapan 260,000
\nBalongan 125,000
\nKasim 10,000
\nCepu 3,800
\nPangkalan Brandan 5,000
\nDumai 120,000
\nSungai Pakning 50,000
\nMusi 135,000
\n-----------------------------------
\nTotal 1,057,000
\n-----------------------------------
\nSource: Pertamina<\/p>",
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