Oil procurement ruling will kill local firms

Oil procurement ruling will kill local firms

JAKARTA (JP): A group of local suppliers blasted on Monday a
number of production-sharing contractors (PSC) of state oil and
gas company Pertamina for setting tough requirements for
companies wishing to be their suppliers.

Heroe Wiedjatmiko, secretary-general of the Goods and Services
Suppliers Communications Forum, said the rulings, which include a
requirement for suppliers to have a minimum capital of US$40
million, would only favor financially-strong foreign suppliers
and "kill" local suppliers.

Heroe said no local suppliers could meet the minimum assets
requirement, as they only had maximum assets of $10 million.

"Only giant, foreign suppliers could meet such a requirement,

"Thus, if the contractors go ahead with such a minimum assets
requirement, all of the local suppliers will undoubtedly be wiped
out in their own country," Heroe told reporters at a press
conference, adding there are now 1,500 local small and midsize
companies supplying goods and services to Pertamina contractors.

Heroe specifically named the unit of American energy firm Vico
Indonesia and Spanish-Argentinean firm Repsol-YPF which operate
the Southeast Sumatra block off West Java as the contractors
which were seeking to introduce such a ruling.

Repsol-YPF Southeast Sumatra is still better known here as
Maxus, an American company, from which Repsol-YPF bought the
Southeast Sumatra block several years ago.

According to Heroe, "Maxus" and Vico unveiled the new ruling
on supply tenders in June last year.

With the new ruling, Heroe said, both Pertamina contractors
wanted to select one single supplier for their respective
operations. Before, there were many suppliers to both
contractors.

By selecting only one supplier, both contractors hoped to
significantly reduce their costs.

Pertamina, however, suspended the companies' plan following
protests from local suppliers and the Indonesian Chamber of
Commerce and Industry, which feared the new ruling would lead to
local suppliers going under and allow foreign suppliers to
monopolize the country's oil and gas industry.

Maxus insisted on putting the new ruling into effect and
Pertamina has reportedly given approval for this to be done on
June 5, according to Heroe.

"That's why we're now questioning Pertamina's inconsistent
policy on the issue," Heroe said.

Pertamina could not use efficiency as an excuse for allowing
its contractors to implement the new rulings at the expense of
local suppliers, Heroe said, warning the closure of all local
suppliers would leave thousands of workers jobless.

Heroe said the forum would wage an information campaign
against the new policy of the Pertamina contractors.

Heroe gave the Pertamina contractors until the end of this
month to revoke their new policy.

"If Pertamina and the contractors insist on implementing the
new goods and services procurement policy, that's up to them. But
we'll file a complaint with the Business Competition Supervisory
Commission (KPPU)," Heroe said.

The antimonoply commission would be the last resort for local
suppliers to seek justice, Heroe said.

The KPPU was established in 1999 to ensure fair competition in
the business world by implementing the provisions of the
antimonopoly law. (03)