Government's plan to liberalize fuel trade welcomed

JAKARTA (JP): The Indonesian Petroleum Association (IPA) yesterday welcomed the government's plan to allow privately-owned oil refiners to sell their products domestically, thereby breaking the monopoly of the state oil firm Pertamina.

"That's what we've been waiting for for a long time," Baihaqi H. Hakim, a director of the association, told a press conference yesterday.

Secretary-general of the Ministry of Mines and Energy Umar Said told a press conference last week that the government will submit to the House of Representatives by the end of this year a new bill allowing private refiners to sell their products domestically on the condition that the crude is imported.

Baihaqi, who is also chairman of the association's 24th annual convention, said that even though the planned bill is not included in the convention's agenda, "I'm sure the participants will talk about it."

The convention will be held at the Jakarta Convention Center on Oct. 10 to Oct. 12. IPA currently has 55 members operating in oil exploration and production, and 151 associate members operating in services supporting the oil industry.

Baihaqi said that the opening of the domestic sales of refinery products for the private sector will be an incentive that will attract more foreign investment in the oil industry.

Tough competition and the small return on investments have hampered the growth of investments in the oil industry, said Baihaqi, who is also president of PT Caltex Indonesia, a U.S. company which produces about half of Indonesia's crude oil output of 1.3 million barrels per day.

Baihaqi said that IPA members will be interested in the trading of refined products on the domestic market.

Caltex, which currently operates a huge oil concession in Riau and a lubricating plant in Medan, North Sumatra, may also be interested in building an oil refinery and selling its products domestically.

The chief of Pertamina's foreign contractors coordinating board, Zuhdi Pane, said that the company will also suggest that the government lower the tax rate on its income from 60 percent -- under Law No. 8/1971 -- to 30 percent under the new bill.

"If we were treated like other companies in terms of taxation, we would be ready to compete with the private sector," said Zuhdi, who also attended yesterday's press conference.

Pertamina currently operates eight refineries with a total processing capacity of 822,000 barrels per day to meet most of the domestic demand for fuel. However, Indonesia still has to import diesel oil and kerosene from Singapore.(04)