Pertamina woes linked to hasty liberalization: Experts<\/p>\n
Fitri Wulandari, Jakarta<\/p>\n
The current financial woes suffered by state oil and gas
\ncompany Pertamina following a hike in oil prices is linked to
\nhasty liberalization in the country's oil and gas sector,
\naccording to experts.<\/p>\n
Noted economist Mohammad Sadli and energy expert Kurtubi said
\nover the weekend that while the government ended the decades-long
\nmonopoly of Pertamina and turned it into a limited liability
\ncompany last year (dismantling its regulatory functions), the
\ngovernment failed to adjust the gasoline pricing policy.<\/p>\n
\"The transition of Pertamina into a limited liability company
\nhas been shrouded in political motivations. It is not beneficial
\nbecause Pertamina is responsible for distributing oil-based fuel
\nbut the government controls the prices,\" said Sadli, who was an
\nenergy minister in the 1970s.<\/p>\n
\"Logically, the (current) gasoline prices must go up. But
\npolitically, the government is unable to do that,\" Sadly added.<\/p>\n
Oil prices in the international market last week surged to a
\n21-year high of more than US$41 per barrel, putting heavy
\npressure on Pertamina's finances as it had to import crude for
\nthe country's needs at the market price, but sell it at home at
\nlower prices as dictated by the government.<\/p>\n
The fuel subsidy of around Rp 14.5 trillion provided by the
\ngovernment in the current budget is far from sufficient to cover
\nthe higher expenses, Pertamina has said.<\/p>\n
Pertamina's finance director Alfred Rohimune said last week
\nthat the company's cash-on-hand was now less than Rp 2 trillion,
\nbut it must pay Rp 5.6 trillion a month to import crude and fuel
\nproducts.<\/p>\n
The company imports some 300,000 barrels of crude and fuel
\nproducts a day.<\/p>\n
\"The company is bleeding. The government has to urgently help
\nPertamina,\" Alfred said at a meeting with lawmakers.<\/p>\n
The government has decided not to raise fuel prices (by
\nreducing the subsidy) for the public during the current general
\nelection year to prevent social and political unrest.<\/p>\n
But energy expert Kurtubi said that if the public was not yet
\nready to pay for gasoline at the market price, Pertamina should
\nnot be turned into a limited liability company and some of its
\nmonopoly privileges should be given back to allow the company to
\nobtain a higher income.<\/p>\n
He explained that since Pertamina lost its monopoly over the
\ncountry's upstream oil and gas sector, the company lost several
\nsources of income.<\/p>\n
For instance, the company lost its retention fee or the fee
\npaid by the government to supervise oil and gas production-
\nsharing contractors (PSCs). The fee was a significant source of
\nrevenue.<\/p>\n
In addition, Pertamina could not buy crude oil directly from
\nthe PSCs but from traders and it has to pay in cash. Pertamina
\ndid not have to pay cash when buying crude oil from PSCs under
\nits supervision.<\/p>\n
\"The process is complicated. Eventually, Pertamina is forced
\nto dig deep into its own pocket to import crude oil,\" Kurtubi
\nsaid.<\/p>\n
Pertamina turned into a limited-liability company last year
\nfollowing the introduction of Law No. 22\/2001 on oil and gas. The
\nlaw scrapped Pertamina's monopoly over the oil and gas sector to
\nlure new oil and gas investors into the country.<\/p>\n
While ceasing to supervise PSCs in the upstream business, the
\ncompany still retains a monopoly in processing and distributing
\nfuel until 2005.<\/p>\n
Both Sadli and Kurtubi argued that if Pertamina's financial
\nproblems linger, an energy crisis would be inevitable.<\/p>\n
\"We have to face it that at some time we will face gasoline
\nshortages,\" Sadli said.<\/p>\n
They urged the government to adjust the gasoline pricing
\npolicy to market forces as part of the liberalization drive in
\nthe sector.<\/p>",
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