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)