New oil and gas law could bust Pertamina: Fuad

New oil and gas law could bust Pertamina: Fuad

JAKARTA (JP): Former minister of finance Fuad Bawazier said on
Saturday state oil and gas company Pertamina could go bankrupt if
the government adopts the new oil and gas bill in its present
form.

Fuad, also a former director general of taxation, said the new
oil and gas bill, which would remove the governmental protection
and privileges Pertamina has enjoyed for decades, would throw the
oil and gas giant on to the fierce market competition.

"Pertamina has been living in inefficiency for a long time. It
will not be able to compete with other companies and will
gradually go bust," Fuad said at a seminar on the immediate
impact of the new legislation on Pertamina's operations.

Fuad said in the free market, the country's largest and most
strategic company must improve its efficiency to enable it to
compete with international companies.

However, he believed, it was impossible for Pertamina to
improve because inefficiency in the company had become chronic.

The oil and gas bill now being debated in the House of
Representatives would lift Pertamina's decades-long monopoly on
the country's oil and gas downstream sector.

Under the bill, the government also would take over
Pertamina's right to award contracts to oil and gas contractors,
as well as its right to manage and regulate the contractors.

Under the bill, the status of Pertamina, whose operation is
now based on a special law, would be changed into a limited
liability company two years after the enactment of the law.

Minister of Mines and Energy Kuntoro Mangkusubroto earlier
said the removal of the monopoly and other protections would free
the oil and gas giant from the government's social mission. This
would allow the company to focus its activities on the oil and
gas business, he said.

"We want to make Pertamina a world-class company, comparable
to Malaysia's Petronas," Kuntoro said.

However, Fuad dismissed the dream of Pertamina becoming a
world-class company as a mere illusion.

"I doubt Pertamina's ability to adjust itself to the new
situation given the fact that it has been inefficient for too
long," Fuad said.

Sharing this pessimism, Pertamina founding president Ibnu
Sutowo recently told The Jakarta Post that in order to compete
with the foreign oil and gas companies which currently dominate
Indonesia's oil and gas sector, Pertamina would need huge funds
and more skilled human resources.

He said Pertamina already had skilled human resources but it
was short of funds for oil and gas exploration and exploitation
because the country's oil and gas revenue went directly to the
government.

"Who is going to lend money to Pertamina amid the country's
economic and political crises," Ibnu asked.

Several analysts have expressed fear foreign oil and gas
companies eventually would dominate the country's downstream
sector in a free market, enabling them to control fuel prices.

However, the president of national oil company Medco Energy
Corp., John Karamoy, recently told the Post he believed Pertamina
would continue to dominate the country's downstream sector over
the next five to eight years.

Karamoy said no investors would be willing to develop a
refinery project in the country in the next several years because
of the economic and political crises.

He, however, warned that foreign companies could take over
Pertamina's role as a leader in the domestic fuel business unless
the company was able to improve its efficiency during the
transition period. (jsk)