Mega to decide on Pertamina tanker sale

Mega to decide on Pertamina tanker sale

Fitri Wulandari, The Jakarta Post, Jakarta

The House of Representatives said it would let the government
decide whether state oil and gas firm PT Pertamina could proceed
with a controversial plan to sell two giant tankers.

Meanwhile, a tanker expert said that it would be more
beneficial for Pertamina to retain the tankers, given the
shortage of Very Large Crude Carriers (VLCCs) in the near future.

"We recommend that the tanker sale be canceled, but we shall
leave it to the President to decide," House Speaker Akbar
Tandjung said on Tuesday following a meeting with a number of
legislators who had just returned from a visit to Hong Kong and
South Korea. They had gone there to gather information about the
sale plan from investment bank Goldman Sachs (consultant in the
sale process) and Hyundai Heavy Industries, the manufacturer of
the tankers, which are currently still under construction.

Pertamina former president Baihaki Hakim decided in 2002 to
purchase the tankers for US$130 million. The purchase was
approved by the government under Presidential Decree No. 18/2000.

However, the current management under Ariffi Nawawi decided to
sell the tankers, citing the company's cash flow problems and
that leasing them would be a cheaper way to transport oil. Hidden
motives are suspected to be behind the sale plan, including that
Pertamina wishes to continue enjoying commission from tanker
owners.

Deputy head of House Commission VIII on mining and energy
Agusman Effendi said that owning the tanker was crucial to
maintaining security and continuity of supplies.

On Monday, Frontline Ltd, in its media release, announced it
had won the tender in Pertamina's tanker sale and agreed to buy
two giant tankers for a total of US$184 million.

Frontline's unit, Ship Finance International Ltd., was
scheduled to take over the vessels within six months and lease
the tankers to its parent company.

Pertamina declined to comment on the matter.

"We have yet to make an official statement -- it will be made
in due course," Pertamina spokesman Hanung Budya Yukyanta said.

Hanung said the divestment process had yet to be completed
because no payment had yet been made by the tender winner.

Meanwhile, tanker expert Raja Oloan Saut Gurning said owning
the vessels would be more profitable for Pertamina than leasing,
given the state of the tanker market in future.

"Pertamina will have to spend US$12.6 million per annum on
leasing, while it could save $3.6 million if it owned the
vessels. The money could be used to pay for the vessels," Saut,
who is a lecturer at the Institute of Technology 10 November
Surabaya told The Jakarta Post.

Saut said that if the sale plan were realized, Pertamina might
end up leasing the vessels from Frontline because they were
specially designed to transport crude oil from the Middle East to
Asia.

He added that Frontline might be eyeing the profitable Middle
East to Cilacap, Central Java, route, where Pertamina has a large
refinery facility.

"Frontline still dominates the Middle East and Asia route," he
said.