Legislators say 'no' to Pertamina tanker sale

Legislators say 'no' to Pertamina tanker sale

Fitri Wulandari, The Jakarta Post, Jakarta

Legislators insisted on Monday they would not approve plans by
state oil and gas firm PT Pertamina to sell two oil tankers,
saying the tankers had long-term benefits for the company.

Irwan Prayitno, a member of House of Representatives
Commission VIII for energy and mining, said that based on
information gathered during a recent visit to Hong Kong and South
Korea, he and other commission members had concluded that it was
best for Pertamina to keep the two Very Large Crude Carriers
(VLCC).

"We disagree with the plan to sell the tankers because owning
them is profitable not only for Pertamina but also for the
country," Irwan of the Justice Party told The Jakarta Post.

Djusril Djusan, another commission member who took part in the
controversial visit to Hong Kong and South Korea, voiced a
similar opinion.

"Under the existing law, the sale of state assets must be
approved by the House of Representatives. The commission is
against the sale," Djusril said.

Both legislators made their statements amid public suspicion
that Pertamina had tried to get the commission's approval of the
sale by sending commission members, along with their spouses, on
a trip to Hong Kong and South Korea. Pertamina has denied that it
financed the trip.

Irwan said 15 legislators took part in the junket, during
which they met with officials from tanker maker Hyundai Heavy
Industries and spoke with consultants Goldman Sachs and World
Tanker about the tanker market.

"The tankers will be useful for transporting fuel products for
the domestic market and transporting crude from the Middle East,"
Irwan said.

He said leasing VLCCs such as the doubled-hulled ones being
built by Hyundai for Pertamina would be more expensive in the
future because of a new rule on maritime pollution, or Marpol,
which will ban the use of single-hulled oil tankers to prevent
oil spills.

The rule will take effect next month for oil tankers bound for
the United States, Europe and Australia.

Once Marpol takes effect, the tanker supply will drop by up to
40 percent globally.

"These types of tankers will be very rare and much needed in
the future," Irwan said.

Meanwhile, Frontline Ltd., the world's biggest oil-tanker
owner, announced on Monday it had agreed to buy Pertamina's two
giant tankers for a total of US$184 million.

Bloomberg reported on Monday that Frontline's Ship Finance
International Ltd. unit was slated to take over the vessels
within six months and lease the tankers to its parent company. It
remains unclear if it has signed a deal with Pertamina and what
impact the House's opposition would have on the deal.

Djusril said the price being offered by Frontline was too low
compared to the market price, which is hovering around $165
million for one VLCC.

He said the House commission would reach a decision on the
matter on Tuesday.

The tankers, each of which can transport up to two million
barrels of crude, were bought by Pertamina's previous management
under president director Baihaki Hakim for a total of US$130
million in 2002. The company at that time argued that owning
tankers would save it up to $7 million in crude transportation
per annum.

However, the current management under president director
Ariffi Nawawi has said it wants to sell the tankers, citing cash
flow problems while arguing that it is cheaper to transport fuel
and crude using leased tankers.