Pertamina denies alleged KKN in new contracts

JAKARTA (JP): State oil and gas company Pertamina dismissed allegations that graft was involved in its multi-billion dollar business of importing petroleum and oil products.

"Based on the information we received from Pertamina, there are no elements of corruption, collusion and nepotism in its oil trade. All its deals are transparent," Minister of Mines and Energy's spokesman Budhi Sulistyo said on Friday.

Pertamina, in a written statement to the ministry, has denied a Reuters report, which was quoted by The Jakarta Post early last week, that there is no transparency in its export and import of crude oil and oil products.

Traders in Singapore complained that Pertamina had made direct deals with international oil companies and select smaller companies to buy petroleum and oil products, instead of staging an open tender system.

The deals were shrouded in mystery, the traders said, using as an example Pertamina's deal with Singapore Petroleum Co. (SPC), which they claim is backed by Petrocom -- a company related to the Indonesian conglomerate Nirwan Bakrie.

Indonesia, though an oil exporting country, imports about 70 million barrels of crude oil per year to feed Pertamina's refineries. Due to the limited capacity of its refineries, Pertamina also imports about 15 percent of the fuel needed to fulfill the domestic consumption of 52 million kiloliters per year.

Trading of both of these products was conducted by two companies linked to Soeharto's family and cronies, Perta and Permindo, for about 20 years, until July of this year when, on the government's order, Pertamina canceled the contracts with the companies and began to conduct the trading itself.

Bakrie is one of the shareholders of Permindo.

Budhi said that since July, Pertamina has been giving all petroleum and oil product suppliers, including major oil companies, refineries and international oil traders, the opportunity to make open tenders to the company.

Pertamina will choose suppliers which offer the most competitive price, the most favorable terms of payment and are able to deliver supplies on time and at the volume demanded.

"In this case, Pertamina will only deal with companies which have international reputations in oil trading," Budhi said.

Budhi quoted Pertamina's statement as saying that SPC is one of the suppliers which meet the criteria set by Pertamina, refusing, however, to comment on the alleged connection between SPC and Bakrie.

Nor did Pertamina say if it had conducted open bidding to select the suppliers.

Pertamina's director for general affairs Hadi Daryono, earlier said that Pertamina had signed one-year contracts to buy crude oil directly from several producers, including Malaysia's Petronas and Saudi Arabia's Aramco. It is also seeking a similar contract to buy oil products from Kuwait Petroleum.

Only a certain portion of the country's demands for crude oil and oil products will be bought from traders, he said.

He stated that Pertamina could save between 10 and 15 cents per barrel under the direct purchase scheme.

A source at Pertamina told The Jakarta Post that Pertamina's move to cancel contracts with Permindo and Perta, and to cut out the role of middlemen in its oil trade, has frustrated some traders in Singapore who had fared well during the era of Permindo and Perta.

"The frustrated people, whom we have well identified, now spread negative rumors to undermine this new, better trading system," the source said. (jsk)