Indonesia oil deregulation needs caution: Subroto
Indonesia oil deregulation needs caution: Subroto
SINGAPORE (Reuter): The deregulation of Indonesia's oil
products market would be done in phases if the country's
parliament passes a bill to allow foreign firms to sell directly
to the market, former OPEC Secretary General Subroto said
yesterday.
"In the minds of parliamentarians, the deregulation will bring
about better prices and service for local customers," he told
reporters after speaking at a chemical conference.
"But it can't be done overnight. You have to go through a
transition period and do it gradually before full deregulation is
implemented," he said
Subroto, a former government minister who now chairs the
recently-formed private think tank, The Foundation of Indonesian
Institute of Energy Economics, was the senior official at the
Organization of Petroleum Exporting Countries in the six years to
June 1994.
He said Indonesia's period of transition towards deregulation
would depend on several factors like the country's infrastructure
and how soon consumers are ready to give up subsidies on products
like kerosene.
He noted that to some parliamentarians, oil product is a
strategic market that should be controlled and managed by the
state.
The amendment to the Oil and Gas Industry Act was initially
scheduled for debate late last year. The bill has been handed to
the office of President Soeharto and is now expected to be
debated later this year.
Oil analysts have said that the attempt to allow foreign
refiners to sell directly to the market would not happen before
1997.
Subroto said before deregulation could be fully implemented,
Indonesia needs to study deregulation in Malaysian and Thailand
and the progress of changes in India.
In deciding to deregulate, Indonesia would have to decide
whether to have one standard price for the whole country, or a
differentiated price policy, he said.
Foreign investors have said that Indonesia's closed market is
the main reason why none of the 11 private firms that have been
granted permits to build oil refineries has started the projects.
Indonesia badly needs additional refining capacity to meet
rising demand for oil products, especially diesel and kerosene,
and to limit its growing dependence on imports.
Earlier this month, national oil firm Pertamina announced that
the country would import 34.4 million barrels of diesel in fiscal
1996/1997 (April/March), nine million barrels more than in
1995/1996. Kerosene imports would also rise from 14.4 million to
16.8 million barrels.
Recent record highs in diesel and kerosene prices have also
alarmed Pertamina which is trying to diversify its import sources
and to make its monthly oil products purchases discreet so as not
to excite oil markets.
Indonesia is Asia's only OPEC member, but booming demand is
expected to turn it into a net oil importer sometime around the
turn of the century.