Govt approves Pertamina's restructuring plan

Govt approves Pertamina's restructuring plan

JAKARTA (JP): The government approved plans by state oil and
gas company Pertamina to replace its current board of directors
and cut the company's workforce by 30 percent, Pertamina said on
Monday.

Pertamina president Baihaki Hakim said that the government
issued presidential decree No169/2000 on the restructuring of
Pertamina's organization last week.

"The restructuring is actually a process of streamlining our
activities. Because of this streamlining and decentralization,
the consequence is that several structural functions will have to
be relinquished" Baihaki told reporters during Pertamina's 43th
anniversary celebration.

He said last week that Pertamina's employees would be reduced
to an "ideal" number of 18,000 from the present 26,000 in a
retrenchment program that would be carried out over five years.

Pertamina's new board of directors will comprise six directors
as compared to the present seven directors, Baihaki said.

The current board of directors comprises an exploration and
production director, a processing director, a finance director, a
logistics and domestic distribution director, a shipping and
communications director, a director of general affairs and the
president director.

He explained that the new board would consist of a president
director, an upstream director, a downstream director, a finance
director, a development director and a production sharing
management director.

The downstream directorate, he said, would integrate
Pertamina's processing activities, its trade and marketing
affairs and shipping activities under one director.

"The streamlining process is especially reflected in the
function of the downstream director," he explained.

The production sharing management director, he went on, would
assume the duties currently held by the head of Pertamina's
Production Sharing Management and Development Body (BPPKA).

Based on the new oil and gas bill, BPPKA's functions will no
longer be controlled by Pertamina and the government plans to
have a separate body handling production sharing partners.

Baihaki said that under the new oil and gas law, Pertamina can
eliminate the production sharing management director from its
organization.

He added that the restructuring was part of preparations to
transform Pertamina into a limited liability company.

New at Pertamina, he said, would be the development director,
with responsibility for, among other things, the development of
human resources, information technology, strategic planning,
environmental issues and business development.

He said that development of these specialties had been one of
Pertamina's main weaknesses.

Baihaki informed that a fit and proper test would determine
the selection of the company's new board of directors.

"We will try to have half of the board replaced with a younger
generation ... new faces," he said .

However, the appointment of new directors requires another
presidential decree, which he expects to be issued in January.

"We want the best, so let this new structure and the new faces
accomplish what we have been aiming for," Baihaki added.

He said a team was reviewing various ways to reduce the
company's workforce, but the reduction would rely mainly on
natural retirement and requests for early retirement.

"But there is no hurry, because every year between 800 to
1,000 employees resign naturally," he added.

Baihaki cautioned that present economic hardships made an
immediate workforce reduction inappropriate.

He said he would try to transfer some of the company's
employees to subsidiaries, other companies or different
positions.

Baihaki said that Pertamina would ask that its assets,
currently held by the government, be returned for the transition
to a limited liability company.

He said that Pertamina might appoint an independent auditor to
evaluate the company's assets held by the government.

"We do not know the exact worth of these assets, but according
to calculations of BPKP (The State Audit Board), the assets are
now worth some Rp 8 trillion (US$842.1 million) to Rp 10
trillion," he explained. (bkm)