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.