Pertamina asks government to transfer US$10b in assets

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)