Pertamina struggling to improve its image

By Johannes Simbolon

JAKARTA (JP): The state oil and gas company, Pertamina, which has been rocked by many scandals over the past several decades, has returned to the press limelight with a battered face this year, following the downfall of former president Soeharto from power in May.

The public has long understood that the country's largest and most strategic company has become a cash cow of corrupt officials and Soeharto's family and cronies for the 32-year rule of the former strongman.

But, in the wake of Soeharto's downfall, revelations by the company over massive involvement of Soeharto's family and cronies in its oil and gas business has greatly stunned the public.

Pertamina said it had awarded projects to, or signed contracts with, at least 159 companies linked to Soeharto's family, cronies and top officials through unhealthy business practices, including corruption and collusion.

Pertamina's former president Soegianto, vowing to root out traces of corruption, collusion and nepotism in the company, canceled or renegotiated most of the contracts, or retendered the projects.

He also closed company marketing offices in Houston, London, and Singapore, and reduced the number of marketing staff in Tokyo this year for efficiency.

Pertamina also implemented tight efficiency programs in several pilot projects, including its own oil and gas field in Prabumulih, South Sumatra, and its refinery in Balikpapan, East Kalimantan.

All these actions, Soegianto claimed, would enable Pertamina to save US$64.7 million in dollar terms and Rp 313.3 billion (US$40.1 million) in rupiah terms per year.

But, before long, the public was again surprised by a finding by the Development Finance Comptroller of indications of massive corruption in the company.

The comptroller said it had found indications of corruption in the company that could inflict a Rp 191 billion loss on the state. The evidence was related to new cases of corruption, not contracts and projects linked to Soeharto's family and cronies that were purged recently from the company's book.

The comptroller also found indications of corruption in other state companies under the technical supervision of Ministry of Mines and Energy, including publicly listed general mining company PT Aneka Tambang, electricity company Perusahaan Listrik Negara, gas distribution company Perusahaan Gas Negara and coal mining company Bukit Asam. But the amount of money that could be lost by Pertamina is higher than in these companies.

Legislator Priyo Budi Santoso of the Golkar party said: "Many people, including myself, felt genuinely relieved by Pertamina's efforts to root out corruption, collusion and nepotism."

"But, the comptroller's findings are really disappointing. I deplore the fact that many people in the company are still knee- deep in corruption," Priyo told The Jakarta Post.

Soegianto, who took over the helm of the company in January this year, is regarded by many as "clean" but the government does not seem to consider him suitable for the giant task of cracking down on the acute inefficiencies in Pertamina and changing it into a world-class oil and gas company comparable to Malaysia's Petronas.

Minister of Mines and Energy Kuntoro Mangkusubroto once said, "We want to make Pertamina comparable to Petronas."

Kuntoro, believing competition boosts efficiency, ascribed Pertamina's inefficiencies to its monopolies on the country's oil and gas industry.

Shortly after assuming his ministerial post in May, Kuntoro announced the government was going to draft a new oil and gas law to scrap Pertamina's monopolies awarded by the oil and gas law of 1971.

Under the new law, Kuntoro said, the government would free it from the unprofitable job of providing fuels to the public at subsidized prices, which currently account for 70 percent of the company's operations.

Pertamina will no longer hold monopolies in the downstream sector of oil and gas as the government will open this to the private sector in competition with Pertamina's refineries. The open competition is expected to force Pertamina to work efficiently and end corrupt activities, otherwise it would become a loser and a laughing stock in the oil and gas industry.

Kuntoro also said the ministry would take over from Pertamina the jobs of regulating and managing oil and gas contractors.

In a nutshell, Pertamina will be designed as a limited liability company with the sole job of making money by finding oil and gas and processing it into fuels.

Kuntoro said on Friday the government would send the draft law to the House of Representatives for deliberation later this month.

New boss

Kuntoro was rumored to be preparing his friend, Erry Riyana Hardjapamekas, president of the publicly listed tin mining company PT Timah, for the top job in Pertamina to replace Soegianto. Kuntoro served as Timah's president from 1989 to 1994.

Analysts guessed Kuntoro, who was lauded for changing Timah from a corrupt company into one of the world's most efficient tin mining companies, was contemplating a plan to shed a large number of Pertamina's 30,000 employees to improve its efficiency, as he controversially did in Timah.

Erry was one of four candidates presented by a ministerial team to President B.J. Habibie but the president opted for his former assistant, Martiono Hadianto, then director general of customs and excise at the Ministry of Finance.

Martiono served as an assistant to the then vice president Habibie from March to May this year, until Habibie took over the nation's top position after Soeharto resigned.

Martiono was installed on Dec. 12.

Businessman Fadel Muhammad, who is known to be active in oil and gas services, regards Martiono a right choice, saying, "he is a tough person, who will be able to end monopolies and stage open competition in Pertamina's business,"

But, several legislators, including Jusuf Rizal Tjokroaminoto of the United Development Party, suspected Martiono's "cleanliness", citing his closeness to Aburizal Bakrie, chairman of the Bakrie group.

Jusuf alleged at a recent hearing between Kuntoro and the House Commission V for industry, mining, trade, manpower, cooperatives and the environment, that Martiono's wife had once worked for Mindo Petroleum, which controlled Permindo Oil Trading Co., one of two companies which held monopolies in oil and fuel imports for Pertamina for less than two decades.

Mindo was owned by Nirwan Bakrie, Soeharto's cousin Sudwikatmono and Soeharto's son Bambang Trihatmodjo and friends.

At the behest of the government, Pertamina ended contracts with Permindo and started importing oil and fuels by itself in July this year.

The accuracy of the legislator's allegation remains unknown, but Pertamina officials amusingly read and photocopy all news articles regarding their new boss' family.

Analysts said it is not easy for Martiono to change Pertamina into an efficient, clean and proud company in the near future. Furthermore, Martiono may not last long in the company, given its ties to Habibie, whose political survival remains in question.