Pertamina asks government to transfer US$10b in assets

JAKARTA (JP): State owned oil and gas company Pertamina said on Tuesday that it would ask the government to transfer the ownership of assets worth US$10 billion to Pertamina as part of the company's restructuring.

Pertamina president Baihaki Hakim said that the government should transfer the ownership of the assets currently being operated by Pertamina as part of the preparation to transform Pertamina into a limited liability company.

"Using a conservative estimate, the assets, including refineries, fuel depots and terminals, are worth some $10 billion," Pertamina president Baihaki Hakim told reporters.

He said the government held the title to most of the oil and gas assets currently being operated by Pertamina as they were purchased with funding from the finance ministry.

Baihaki said that Pertamina had yet to appoint an independent consultant to appraise the value of the assets.

"Pertamina and the consultant will then (when appointed) work together with the Ministry of Finance," he said.

He added that the estimate of $10 billion was a conservative one, noting that it already took into account depreciation.

In the first year, he continued, the company would consolidate the assets and filter out those which Pertamina wanted to dispose of.

"We're sifting through our assets; those we want to keep and those that we can sell," he explained.

However, Baihaki declined to estimate how much of its assets Pertamina planned to sell.

"We cannot just sell assets that are of no use. We must raise their value before selling them," he explained.

He also said Pertamina would invite strategic investors as partners to optimize the value of certain assets.

He said that for instance, the production capacity of the Cilacap refinery could be raised by another 50,000 barrels of oil per day, for which purposes Pertamina would be looking for investors.

Pertamina's move to become a limited liability company is part of the government's plan to restructure the oil and gas industry.

A new oil and gas bill has been submitted to the House of Representatives to replace Law No. 44/1960 on the oil and gas industry and Law No. 8/1971 on Pertamina.

At present, oil and gas companies operate as production sharing partners to Pertamina, which supervises them on behalf of the government. The bill will scrap Pertamina's supervisory function and turn the company into a production sharing partner to the government.

A separate independent body would be established to assume Pertamina's supervisory function.

Under the bill, Pertamina will also relinquish its monopoly rights over the distribution and selling of fuel, though Baihaki added that the government would want Pertamina to maintain its strong presence in the market.

Baihaki said that for Pertamina to continue distributing and selling fuel, the government needed to abolish fuel subsidies, thus allowing Pertamina to sell fuel at the market price.

One of the company's biggest challenges, he said, would be to increase investment in the downstream sector, which covered fuel distribution and marketing activities.

"There hasn't been any investment in the downstream sector for practically the last five years, whereas fuel demand continues to grow," he went on.

To help raise capital, Baihaki hoped the government would sell off some of its stake in Pertamina by 2005.(bkm)