Pertamina replies

Pertamina replies

With regard to your Jan. 14 article on the hike of fuel prices
written by Parulian Sihotang and Alex Russell from the Department
of Accountancy and Business Finance at the University of Dundee
in the UK, we feel it necessary to convey the following points:

We feel that the article has harmed our company's image
because the writers referred to out-of-date data from the World
Bank based on the 1988-1999 survey to explain about the hikes set
by the government on Jan. 1, 2003. This is, of course, irrelevant
as Pertamina has made significant changes over the last three
years.

Efficiency has been, and will always be, part of the company's
policy. To evaluate the efficiency of Pertamina's refineries,
Shell Global Solution (SGS) conducted a benchmark study on other
refineries abroad.

Overall production costs of Pertamina refineries in 2000 stood
at US$1.10 a barrel and in 2001 at about $1.03 a barrel, which is
still within the range of prices of other refineries abroad of 70
cents to $2.50 a barrel. Pertamina thus belongs to the 30 percent
share of the best group of refineries with operational costs of
below $1.10 a barrel.

Production costs heavily depend on the price of crude oil,
reaching 91.68 percent of costs, which is beyond Pertamina's
control and processing units. Therefore, it is unreasonable to
relate the hikes with the inefficiency of Pertamina's refineries.

So far Pertamina calculates the basic price of fuel based on
the average price for all types of fuel subsidized by the
government (the regulated price for five types of fuel).

Pertamina's costs have also decreased significantly from Rp
1,810 a liter in 2001 to Rp 1,627 a liter in 2002 and is expected
to go down to Rp 1,492 a liter in 2003.

In distribution and sales in 2002, Pertamina succeeded in
reducing sales of subsidized fuels to 52.6 million kilo liters.
This figure is lower than the maximum limit set by the 2002 state
budget of 52.7 million kilo liters. In addition, Pertamina
managed to cut half of the 0.5 percent of tolerable losses set by
international standards in fuel distribution.

Based on data from the Development Finance Comptroller
(BPKP), Pertamina's supply loss in 2001 stood at 0.25 percent of
the 88,707,945 kilo liters of fuel distribution. The success
represents efficiency measures taken by Pertamina given the fact
that when there is a loss above the tolerable limit, the margin
is removed from the cost of subsidized fuels and becomes the
burden of Pertamina.

RIDWAN NYAK BAIK, Corporate Service, Public Relations Manager,
Pertamina, Jakarta