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)