Govt to award Pertamina one-year PSO deal
Leony Aurora, The Jakarta Post, Jakarta
Citing a lack of readiness on the part of new players in the fuel retail business, the government says it will give state oil and gas company PT Pertamina a contract to distribute subsidized fuel across the archipelago for another year.
Pertamina will be the sole distributor for premium gasoline, kerosene and diesel fuel for households, transportation and small industries for one year, starting Jan. 1, 2006, the chairman of the Downstream Oil and Gas Regulatory Agency (BPH Migas), Tubagus Haryono, said in a telephone interview on Tuesday.
"The contract is for one year, as our state budget mechanisms are also (controlled) annually.
"We will issue the letter affirming Pertamina's appointment before this year ends," said Tubagus.
Law No. 22/2001 on oil and gas officially stripped Pertamina of its monopoly over the distribution of fuel, beginning on Nov. 23, 2005. The government has extended the current cost-and-fee mechanism with Pertamina up to Dec. 31, and will put a new tender system, based on Mid Oil Platts Singapore (MOPS) prices, plus a premium for distribution costs and profit margin, in motion on Jan. 1, 2006.
However, BPH Migas, which represents the government in regulating and supervising the country's downstream oil and gas sector, has ruled that any company that wants to distribute subsidized fuel in Java must also distribute fuel to more remote areas in the country.
New players in Indonesia's retail fuel market, such as Royal Dutch Shell and Malaysia's Petronas, are seen as not being ready to take part in the fuel distribution tender because they only have gas stations in Java.
Tubagus said that should retailers want to get a piece of the lucrative subsidized fuel market next year, they could do so in partnership with Pertamina.
"They can conduct business-to-business agreements, for example, to distribute fuel produced by Pertamina," said Tubagus. "They cannot just jump in mid-year, as our budget is calculated annually."
Selling high octane, unsubsidized gasoline, Shell has opened one gas station in Lippo Karawaci, west of Jakarta, and will start operating another station in Mampang, South Jakarta, in the near future.
Petronas began a trial operation of its first gas station in Cibubur, South Jakarta, last week and plans to open the station officially in January. According to data from the Directorate General of Oil and Gas, Petronas plans to build some 65 gas stations in Indonesia over the next two years.
With the implementation of the new public service obligation to win the right to distribute subsidized fuel, Pertamina expects to see its net profit double next year to Rp 22.4 trillion (US$2.28 billion) from an estimated Rp 11.3 trillion this year.
The firm's finance director, Alfred Rohimone, said on Nov. 23 that Pertamina's downstream retail sector would multiply tenfold and contribute some Rp 10 trillion to the company's net profit from Rp 1.2 trillion this year.
Pertamina currently receives 40 U.S. cents for every barrel of fuel processed at its refineries and distributed through its network, which translates to Rp 10 per liter of fuel after taxes.
Pertamina has requested that the government pay 15 percent above the MOPS, which hovers at about $66 for fuel products at current crude oil prices, to cover transportation and distribution expenses, as well as to provide a profit margin.