Pertamina criticizes World Bank proposal

The Jakarta Post, Jakarta

State-owned oil and gas company Pertamina criticized a proposal from the World Bank for the government to sell off its Balikpapan refinery in East Kalimantan and the Cilacap refinery in Central Java.

Pertamina's president Baihaki Hakim said Tuesday that the state company suspected the proposal was aimed at reducing Pertamina's refinery assets in a bid to weaken its competitiveness in the country's fuel market when the government liberalized the sector in 2005.

"We have rejected the proposal," Baihaki was quoted by Antara as saying.

Baihaki did not give details of the proposal, but a report in Kontan weekly last week said the proposal was contained in a letter sent by former World Bank country director in Indonesia Mark Baird in May this year.

Baihaki said he believed certain parties, both locals and foreigners, were using the World Bank to divide Pertamina up into many small companies so that Pertamina's competitors could buy up their assets and control the country's fuel market.

The Cilacap and Balikpapan refineries, which respectively have a capacity of 348,000 barrels per day and 260,000 barrels per day, are the largest owned by Pertamina. The state company also has seven other small refineries located in Pangkalan Brandan, North Sumatra; Dumai and Sungai Pakning, Riau; Balongan, West Java; Kasim in Irian Jaya; and Cepu in Central Java. Overall, the refineries have a combined capacity of 1.05 million barrels per day.

Under the new oil and gas law which took effect last year, the government is to open up the fuel sector to competition in 2005. Starting that year, private companies will be free to build refineries and sell their fuel products here.

A government team is reportedly drafting a ruling to regulate the sector and the World Bank proposal is one of the inputs being considered by the team.