Govt to award Pertamina one-year PSO deal

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.