Factions supports bill to ease up Pertamina's grip

JAKARTA (JP): Most factions in the House of Representatives expressed support on Thursday for the government's proposed oil and gas bill, which would end state oil and gas company Pertamina's three-decade long monopoly of the country's oil and gas sector.

However, they warned the government against liberalizing the sector too quickly, fearing such a move could lead to foreign companies dominating the country's oil and gas sector.

The bill was submitted to the House by Minister of Mines and Energy Kuntoro Mangkusubroto last week and the House began deliberating the bill on Thursday.

Legislator Sutjipto of the ruling Golkar said a new oil and gas law was needed because the current 1971 law which granted Pertamina a monopoly of the country's oil and gas resources was incompatible with the current era of competition.

"The current law should be improved to allow all economic actors to contribute to all economic sectors, including the oil and gas sector," he said, reading out a statement from the Golkar faction.

Golkar and other House factions, including the Armed Forces and the Indonesian Democratic Party (PDI), attributed the rampant corruption, collusion and nepotism in Pertamina over the past three decades to weaknesses in the current oil and gas law.

"The current law provides the opportunity for corruption, collusion and nepotism to occur. That's why the Armed Forces faction sees the importance of having a new oil and gas law," Suharna Ruchiat said, reading out a statement from the Armed Forces faction.

Pertamina announced last year that former president Soeharto's family and cronies had signed at least 159 contracts with Pertamina over Soeharto's 32-year reign.

Pertamina has annulled and renegotiated most of these contracts.

However, the United Development Party (PPP), the second- largest faction in the House, fell short of supporting the government's plan to end Pertamina's monopoly.

A. Walid, the spokesman for PPP's faction, said Pertamina's monopoly was not bad as long as it was used to benefit the public.

"Who is actually behind Pertamina's failure to develop the country's oil and gas resources? Does some faulty construction in Pertamina's house mean that it must be demolished? Maybe the case is that there are rats in the house which must be killed and some of Pertamina's neighbors are thieves whose hands must be cut off," Walid said, reading out PPP's statement.

Under the proposed bill, the government will take over some of the jobs currently performed by Pertamina, including granting oil and gas contracts and managing the operations of foreign oil and gas companies.

PPP does not believe that corruption would end if government officials took over Pertamina's jobs.

"PPP is worried that the bill will only transfer to other parties the opportunity to engage in corruption in the country's oil and gas industry," Walid said.

Under the proposed bill, Pertamina will become a limited liability company and transfer to the government all its rights and obligations to foreign oil and gas contractors two years after the bill becomes law.

Golkar said the bill's privatization program for Pertamina was too drastic, proposing that "the process be carried out gradually in a programmed way".

Most factions regretted the fact that the bill did not contain clauses which would empower national oil and gas companies.

They also called on the government to be careful in its plan to liberalize the country's oil and gas sector given the vital role of the oil and gas industry in developing the nation.

"The new law is not expected to give foreign enterprises the freedom to develop (the country's oil and gas resources) based on investments, costs and benefits without any control of law," PDI legislator Anthonius Rakhail said, quoting the constitution, which says the nation's natural wealth should be used for the maximum benefit of the people.

Golkar also proposed that the government maintain the obligatory production sharing contract system because it has "proven beneficial to the government".

The draft bill states that foreign oil and gas companies will not be obliged to sign a production sharing contract. (jsk)