Companies must have gas stations outside Java to partake in PSO
Leony Aurora, The Jakarta Post, Jakarta
New players in the downstream oil business will not be allowed to distribute subsidized fuel if they do not operate gas stations outside Java, which could give state oil and gas firm PT Pertamina a de facto monopoly after the sector is liberalized.
No plans for gas stations outside Java have been submitted by players such as Royal Dutch Shell Plc. or Malaysia's Petronas, which appear to be the most prepared to take part in the retail sector, the chairman of the Downstream Oil and Gas Regulatory Agency, Tubagus Haryono, said on Tuesday.
"We will not let (new players) supply subsidized fuel only in Java," he said, adding that they appeared to be technically unprepared to participate in the public service obligation (PSO) by next year.
"If they are not ready, we will appoint Pertamina to distribute the fuel," said Tubagus.
Under Law No. 22/2001 on the oil and gas industry, Pertamina will no longer hold a monopoly on the distribution of fuel beginning on Jan. 1, 2006.
The government will divide the country into four trading zones: the first zone is Java and Bali; the second is Sumatra; the third is Kalimantan, Sulawesi, Maluku and Papua; and the fourth is West and East Nusa Tenggara.
Each province will be designated as a developed, less- developed or underdeveloped area. A company that wants to distribute subsidized fuel in a developed area, like Java, which consumes larger volumes of fuel, will be required to build and operate gas stations in underdeveloped areas, such as Papua.
Shell was the first new player to enter the market, opening a retail outlet that sells unregulated high-octane premium gasoline on Oct. 30 in Karawaci, west of Jakarta.
Subsidized-fuel distribution, however, is considered much more lucrative, accounting for up to 95 percent of total fuel consumption here.
Shell Indonesia's vice president for external and business affairs, Wally Saleh, said the company was waiting to see the PSO regulation.
"We hope to participate in the PSO as soon as possible. Let's see how the regulation is," he said, declining to comment if Shell wad ready to operate outside of Java.
The Ministry of Energy and Mineral Resources is scheduled to submit a draft of the PSO concept to the President this week. The draft is expected to be signed before Nov. 23.
Tubagus said new players might want to cooperate with existing private gas stations outside of Java -- Pertamina owns only a few dozen of the some 2,600 gas stations spread across the archipelago -- to speed up their retail development.
He quickly added, however, that most stations already had long-term contracts of between 10 years and 30 years with Pertamina.