Bill would break Pertamina fuel sale monopoly

Bill would break Pertamina fuel sale monopoly

JAKARTA (JP): Privately-owned refineries may soon be able to
sell their products domestically, under a bill on oil and gas
development soon to be submitted to the House of Representatives.

"The most difficult thing in preparing the bill is to find a
formula on the sales of refinery products which will not violate
the Constitution of 1945," Ministry of Mines and Energy
Secretary-General Umar Said told a press conference yesterday.

The bill will be presented to the House by the end of the
year, he said.

He said the bill would not violate article 33 of the
Constitution because it would not allow privately-owned refiners
to sell their products domestically if they process crude from
local oil fields.

Article 33 of the Constitution stipulates that the land, water
and other natural riches contained in the earth of Indonesia
shall be controlled by the state and shall be used for the
people.

"The private companies which will establish refineries in the
country will process crude oil from the Middle East," Umar said.
"They, therefore, will not violate the regulations if they sell
their products on the domestic market."

He acknowledged that the new bill, when approved by the House,
would revise Law No. 8/1971 on Pertamina, which granted the state
company Pertamina the monopoly of oil refining in the country.

He said the bill is aimed at attracting more private
investment in the oil and gas industry.

By allowing private refiners to sell their products on the
domestic market, Indonesia will be able to meet all of its
demands for fuel, he added.

Even though Pertamina's refineries, with a total processing
capacity of 822,000 barrels per day, can meet most of the
domestic demand for fuel, Indonesia currently imports diesel oil
and kerosene from Singapore.

Umar said that gas stations distributing gasoline of
privately-run refiners would carry their names and logos, instead
of that of Pertamina.

"Pertamina and private companies will compete in services," he
said. "Such a condition will lead to efficiency improvement."

The government has licensed seven private companies to operate
oil refineries: PT Indo-Xo (which will build a refinery with an
investment of $2 billion in Sorong, Irian Jaya), PT Sabang Oil
Refinery Corporation (in Sabang, Aceh, with $1.58 billion), PT
Tanjung Uban Refinery (in Riau, with $1.5 billion), PT Asia
Pasific Petroleum Indonesia (in Situbondo, East Java, with $1.09
billion), PT Buana Ganda Perkasa (in Probolinggo, East Java, with
$3.5 billion), PT Indo Moody Oil Comp. (in Pare-Pare, South
Sulawesi, with $1.32 billion) and PT Norco Internusa (in Gresik,
East Java with $1.8 billion).

Asked about the possibility of the private refiners
determining the prices of their own products on the domestic
market, Umar said the government would continue controlling the
prices.

He said the government would limit the licenses for new
entrants when the production of the private refineries reached a
certain percentage of the domestic demand.(04)