Analysts predict Pertamina facing uncertain future

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)