Govt to review Pertamina trade, shipping contract

Govt to review Pertamina trade, shipping contract

JAKARTA (JP): Minister of Mines and Energy Kuntoro
Mangkusubroto said yesterday the government would review all
contracts between state oil and gas company Pertamina and trading
and shipping companies, including those owned by former president
Soeharto's family.

"All the contracts will be reviewed and the results of the
evaluation will be announced transparently," Kuntoro said after
the cabinet's first meeting at the palace.

He said that beginning next month the government would
introduce open bidding for new contracts for the import, export
and transport of Pertamina's fuel and crude oil.

"No special treatment will be given to any parties," he said.

Indonesia produces 1.5 million barrels of crude oil and
condensate per day, about 50 percent of which is exported mainly
to Japan.

Pertamina exports its crude oil to Japan through Pacific
Petroleum & Trading Co., equally owned by Pertamina and a
Japanese firm.

"The Japanese market is very difficult to penetrate unless we
cooperate with Japanese companies," Pertamina president Soegianto
once explained.

Indonesia, though a net oil-exporting country, imports between
15 percent and 20 percent of the 52 million kiloliters of fuel it
consumes annually due to the limited capacity of Pertamina's
refineries.

Pertamina also imports 70 million barrels of crude oil
annually, mainly from the Middle East, to feed its refineries.

The state oil and gas company buys imported fuel and crude oil
from Perta Oil Marketing Ltd. and Permindo Trading Oil Co. Ltd.,
both of which have had the exclusive rights to import the
commodities for decades under government decree.

Pertamina has a 30 percent stake in Penta and a 35 percent
stake in Permindo, but the company refuses to publicly reveal the
names of the other shareholders.

Sources say the remaining 70 percent stake in Penta is owned
by a consortium that includes the Humpuss Group controlled by
former president Soeharto's son Hutomo Mandala Putra -- also
known as Tommy -- and Soeharto-linked foundations.

The remaining 65 percent stake in Permindo is owned by Mindo
Petroleum, a consortium partly owned by Soeharto's son Bambang
Trihatmodjo, Soeharto's cousin Sudwikatmono, Nirwan Bakrie and
Roosano Barack.

Kuntoro estimated that these companies receive a commission of
up to 35 U.S. cents per barrel.

Pertamina processing director Samto Utomo recently said the
company would establish a new trading division to handle crude
oil and fuel imports in competition with both companies.

Oil traders throughout Asia applauded the government's move,
saying it would provide greater transparency into trading
activities.

"This is certainly welcome news," said a trader with a
Chinese-affiliated oil-trading company in Singapore.

"It will open the market to more than just a few people who
have been regularly supplying to Indonesia," a trader in
Singapore told Dow Jones yesterday.

Japanese trading houses and refineries said they were not too
concerned about the government's move.

"We assume our minor but direct purchase contracts with
Pertamina won't likely be affected by the review," said an oil
trader with a leading Japanese refinery. "Also, given that we're
facing a dwindling demand for Indonesian grades, we aren't too
concerned," he added.

Analysts say the review might also affect Pertamina's
contracts with publicly listed PT Humpuss Intermoda Transportasi,
controlled by Tommy.

The company said in its 1997 annual report that Pertamina
chartered nine of its tankers to transport crude oil and another
three tankers to carry liquefied natural gas (LNG) to export
markets. The charter period of the tankers range from ten to 12
years.

The company claims that its tankers make up less than 20
percent of the total armada being chartered by Pertamina. (jsk)