BP eyes fuels business in the country

BP eyes fuels business in the country

Fitri Wulandari, The Jakarta Post, Jakarta

BP Indonesia is planning to enter the country's fuel retail
business, posing a challenge to state oil and gas company
Pertamina that has monopolized the sector for decades.

Ministry of Energy and Mineral Resources official Erie
Soedarmo said the subsidiary of Anglo-American energy giant BP
had applied for a retail license, which the government was now
processing.

"The government will issue a temporary license first for a
period of up to two years depending on the investment," Erie said
on Tuesday.

A permanent license would be awarded to BP if the company
showed it had a long-term interest in the business, Erie said.

BP officials were not available for comment.

BP has been long active in the country's "upstream" fuel
prospecting and extraction sector, with projects including the
Tangguh liquefied natural gas (LNG) plant in the Bird Head's area
of Papua -- the third LNG plant in the country. However, like
other oil retailers, it is barred from entering the "downstream"
retail sector, where state monopoly Pertamina has had monopoly
rights for decades.

In 2001, the government issued new oil and gas laws, which
would allow foreign investors to process crude oil, and import
and distribute fuel once Pertamina ended its monopoly next year.

Pertamina will also face a challenge from Malaysian energy
giant Petroliam Nasional Berhad (Petronas), which announced its
plan to enter the business last year, pledging to invest US$100
million a year to develop its gas station network in the country.

Investors must file applications with the ministry, while
licenses are issued by the Downstream Oil and Gas Supervisory
Body (BPH Migas).

BPH Migas has issued preliminary approvals for six companies
to start downstream businesses here. The companies are PT Sigma
Rancang Perdana, PT Pandu Selaras, PT Elnusa Petrofin, PT Elnusa
Harapan, PT Raven Sejahtera and PT Krida Petragraha, which is a
Royal Dutch/Shell Group unit.

Meanwhile, the government is scrambling to complete the
drafting of regulations governing the retail sector. Top
officials are reportedly divided over several issues, including
whether big companies, such as BP and Petronas, will be allowed
to own fuel stations here or will have to enter into partnerships
with local small and medium enterprises (SMEs) and cooperatives.

Some politicians have reportedly pressed the government to
insert partnership clauses in the draft regulations.