Oil refining, retail market to be liberalized: Kuntoro
Oil refining, retail market to be liberalized: Kuntoro
JAKARTA (JP): A law now being prepared by the government will
liberalize the oil refinery sector and open up the retail market
in oil products, Minister of Mines and Energy Kuntoro
Mangkusubroto has said.
He believed its enactment would lift state oil and gas company
Pertamina's monopoly on the country's refinery sector and
distribution of oil products on the domestic market.
"The law aims at making the country's oil and gas industry
open, competitive and efficient," Kuntoro said on Friday.
The minister said the policy was part of the deregulation
package set down in the new oil and gas law, whose draft will
soon be deliberated by the House of Representatives.
He said the law would allow the private sector to build
refineries in the country, buy crude oil for their refineries and
market their products on the domestic market.
The government opened the door for private investors to build
refineries in late 1989. However, no investors were interested
due to the regulation forbidding private refinery owners from
selling their products on the domestic market and Pertamina
giving no assurance of the provision of a crude oil supply.
Then president Soeharto eased the regulation in 1997 by
allowing private refinery owners to enter into an off-take
agreement with Pertamina for the sale of their products on the
domestic market, at a price agreed upon by both parties.
Dozens of investors applied for the license to build
refineries, but Pertamina was only willing to make the agreements
with several companies controlled by Soeharto's family and
cronies.
They have not realized their refinery projects due to the
economic crisis battering the country since mid-1997.
"Thus, the monopolistic system has created room for collusion,
corruption and nepotism," Kuntoro said.
Kuntoro said he would propose President B.J. Habibie replace
the 1997 presidential decree with one which would comply with
the new oil and gas law.
Pertamina operates nine refineries with combined processing
capacity of one million barrels per day.
According to Pertamina data, the country consumes about 50
million kiloliters of fuel per year, between 15 percent and 20
percent of which is imported.
Analysts say investors are discouraged from investing in the
country's refinery sector due to heavy government subsidies on
fuel prices.
But Kuntoro promised that the government would gradually lift
all fuel subsidies through 2002 to allow fuel prices to be
determined by the market forces.
The government recently lifted subsidies on jet fuel.
"People need not be afraid that fuel prices will keep
increasing once all fuel subsidies are lifted. In fact, refinery
owners will vie to cut the prices of their products once
competition is in place," Kuntoro said.
He added that the new oil and gas law would change Pertamina
into a limited company in competition with other oil and gas
companies.
The law would aggressively liberalize the country's oil and
gas industry and is expected to be able to accommodate all the
possible developments in the world's oil and gas industry "over
the next 30 years".
Earlier, Kuntoro said the law would not oblige oil and gas
contractors to adopt production sharing contracts (PSC) for their
oil and gas operations in the country. They will allowed to adopt
any type of contract aside from the PSC system. (jsk)