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)