Pertamina ready for free market
Pertamina ready for free market
JAKARTA (JP): State oil and gas company Pertamina is beefing
up its operations to enable it compete with multinational oil
companies in the distribution and sale of fuel in the domestic
market.
Company processing director Samto Utomo said recently that
Pertamina had taken steps, including improving the efficiency of
its refineries, to anticipate the free market era.
Samto said Indonesia as a member of the Association of
Southeast Asian Nations (ASEAN) should open its fuel market
beginning in 2003 under the ASEAN Free Trade Area (AFTA)
agreement, but the government had signaled it would open the
market sooner.
Other ASEAN members are Malaysia, the Philippines, Singapore,
Myanmar, Thailand, Brunei, and Vietnam.
The existing law awards Pertamina the monopoly over the
distribution and sale of fuel domestically.
Pertamina has nine refineries located in Pangkalan Brandan,
North Sumatra; Dumai and Sungai Pakning, Riau; Musi, South
Sumatra; Balongan, West Java; Cilacap and Cepu, Central Java;
Balikpapan, East Kalimantan. They have total capacity of about
one million barrels per day of crude oil.
The law permits private companies to develop refineries but no
private projects have thus far been realized.
Samto said several international oil companies, including
Esso, Mobil and Caltex of the United States, had made
preparations for the free market.
Caltex is considered the most aggressive among the companies
to anticipate the free fuel market.
Thousands of billboards carrying the company's five-pointed
star logo have been erected at strategic locations throughout the
country.
Company president Baihaki Hakim once told The Jakarta Post
that the large-scale logo promotion was intended to create brand-
name awareness among the public.
He said Caltex would supply the country with fuel from its
refineries in Singapore and Thailand.
Samto believed Pertamina would be able to compete with the
multinational companies because of the lower production cost of
its refineries.
He said Pertamina's refineries had an average production cost
of US$1.4 per barrel, lower than the average cost of $2.4 per
barrel in ASEAN.
"But refineries in Singapore still have a lower production
cost of $1.3 per barrel," Samto said.
The country consumes 52 million kiloliters of fuel annually,
only 80 percent of which is supplied from Pertamina's refineries.
Samto noted foreign oil companies would not able to compete
with Pertamina in the current situation where the government
still subsidized fuel.
The government recently raised fuel prices to cut the
government subsidy for the commodity from Rp 16 trillion to Rp 6
trillion for the current fiscal year.
"The government needs to totally eliminate the subsidy so that
they can compete with us," Samto said. (jsk)