Analysts predict Pertamina facing uncertain future
JAKARTA (JP): State oil and gas company Pertamina will face a bleak and uncertain future once the government lifts its decades- long oil and gas monopoly in line with the new oil and gas law, analysts said on Friday.
"We have to raise the flag for the death of Pertamina," Ramses Hutepea, a former staff expert for the ministry of energy and mineral resources, told The Jakarta Post.
Ramses said once the government implemented the new oil and gas law, the state company would have no other choice but to cut its workforce.
It will then gradually decline and eventually be taken over by other giant oil and gas companies, as was Argentinean former state owned oil and gas firm YPF, he said. YPF is now owned by Spanish giant Repsol.
"There is no way to save Pertamina," he said.
The House of Representative and the government completed this week the debates on the new oil and gas bill, and the House expects to officially pass it into law next month.
The new law will replace Oil and Gas Law No. 44/1960 and Pertamina Law No. 8/1971, which granted Pertamina a broad monopoly in the country's oil and gas industry.
Under the new law, the government will scrap Pertamina's monopoly, turn it into a limited liability company and liberalize the oil and gas sector.
The government will form two independent boards, called respectively the Executive Body and the Regulating Body, to take over Pertamina's supervisory and regulatory roles in the oil and gas industry.
The new law will also free Pertamina from its social mission of providing subsidized fuel on the domestic market.
The new law allows two years for Pertamina to transform itself into a limited liability company and four years for the regulating body to take over fuel supply and distribution.
Minister of Energy and Mineral Resources Purnomo Yusgiantoro has repeatedly said the new law will make the best of Pertamina and turn it into a respected global player, like Malaysian state oil and gas company Petronas.
Oil and gas columnist Kurtubi, who is also a Pertamina employee, and Bachrawi Sanusi, a lecturer at Trisakti University, also voiced pessimism over Pertamina's future once it loses its monopoly.
However, they said, there were many ways for the government and Pertamina's leadership to save the company from bankruptcy.
Kurtubi said the disaggregation program being conducted by Pertamina's leadership, which aims to divide the company's business into separate, independent units, should be halted because it was inefficient and against the trend for mergers within the global oil and gas industry.
"An integrated firm is always more efficient than a disaggregated one," he told The Post.
Kurtubi and Bachrawi said the government should also allow Pertamina to generate income by selling fuel at international prices on the domestic market.
The government should also provide various incentives for Pertamina to expand its upstream operations in competition with the international firms that now dominate the country's oil and gas industry, they said.
One of the incentives is that Pertamina should be allowed to use its revenue from some productive fields to cover its exploration costs in other areas, they said.
Under the existing rules, no oil or gas companies are allowed to use revenue from their productive fields to cover exploration costs in other areas.
Kurtubi and Bachrawi also called on the government to transfer all fields from foreign contractors to Pertamina whenever their contracts expired.
"Under all these conditions, I'm sure Pertamina will become a world-class firm," Kurtubi said. (iwa)