Pertamina to become limited company

Pertamina to become limited company

M. Taufiqurrahman, The Jakarta Post, Jakarta

The government has granted its approval for state oil and gas
company Pertamina to become a limited liability company, paving
the way for its privatization in 2006, a government official said
on Wednesday.

State Secretary Bambang Kesowo told reporters that he was
informed that President Megawati Soekarnoputri had signed the
decree on the matter on Wednesday morning.

Under the limited liability decree, Pertamina must decide
within two years whether to keep non-core business units, such as
hospital, hotel and airline operations, or spin them off.

The government will also decide within two years whether
Pertamina must transfer its oil refineries and natural gas
liquefaction plants to the government.

Pertamina has mixed views on the issuance of the governmental
decree on the transformation of its status into a limited
liability company.

In a hearing with House of Representatives Commission VII for
energy, environment, science and technology, Pertamina president
Baihaki Hakim, before he knew about the signing of the decree,
said that the draft decree, if enacted, could prevent Pertamina
from becoming a major world player in the oil and gas industry.

"According to Law No. 22/2001, Pertamina is required to
concentrate on the oil and gas business and to leave its
regulatory functions behind. But the business climate, as a
result, is set to become very hostile for Pertamina ... and will
benefit Singapore- and Hong Kong-based traders," he said.

He said the interpretation of the law on oil and gas had gone
too far in dismantling the assets of Pertamina.

Recently, the top executive also said that there had been a
wide difference of perception between Pertamina and the
government on what constituted the company's core business. The
government limited the definition to business activities related
to oil and gas, while Pertamina insisted on maintaining its foray
into other businesses such as hotels and airlines.

But later on Wednesday, after being told that the decree had
been signed, he told reporters that Pertamina hailed the
government decree as it had been the result of intense discussion
in the Cabinet.

"I think the decree still accommodates Pertamina's interests,
as we have learned that Pertamina's entire assets will be
transferred to the new enterprise," he said, adding that all oil
refineries and natural gas liquefaction plants would still be in
the hands of Pertamina.

Separately, oil and gas industry analyst Kurtubi said that the
planned transformation of Pertamina into a private company would
leave the country without an entity capable of maintaining the
supply of oil and gas for the benefit of the public.

"The sole motivation of a private enterprise is to seek profit
to the maximum extent, and therefore the tendency to fulfill
public needs could be abandoned entirely," he told The Jakarta
Post.

He also said that without Pertamina as a state-owned
enterprise, the government would no longer have an institution to
regulate the oil and gas industry in the country.

"I doubt if a regulatory body could take the place of
Pertamina as it has no resources to perform such a task," he
said, adding that to function well the regulatory body should
have oil and gas resources, refineries and tankers of its own.

He asserted that Pertamina could still be a major player in
the oil and gas industry if the bulk of its assets were
maintained under its control. Pertamina, for example, could exert
its power upon buyers of liquefied natural gas, if it could
secure full control over its supply.