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.