Pertamina to build new gas stations

The Jakarta Post, Jakarta

State-owned oil and gas company PT Pertamina plans to build hundreds of new gas stations across the country in hopes of eventually controlling at least 20 percent of the country's total gas stations as the fuel retail sector will be liberalized next year.

"We want to develop our own gas stations and run them directly. We'll try to control at least 20 percent of the total, but of course it will depend on our budget," Pertamina director of marketing and business Ari Soemarno was quoted as saying by detik.com on Saturday.

Ari added that Pertamina was also ready to compete with multinational firms which have expressed interest in entering the oil and gas downstream sector, such as BP PLc., ExxonMobil, Shell, Petronas and Caltex, all of which have more working capital than Pertamina.

"We really should get ready and be prepared to compete with them since the liberalization process is drawing near," he asserted.

According to Law No. 22/2001, Pertamina's monopoly rights in the management of fuel distribution in the country will only be valid until November 2005.

Thus, private investors -- both local and foreign -- can enter the downstream sector, which consists of four main areas: processing, transportation, storage, and marketing.

The Downstream Oil and Gas Authority Body (BPH Migas) will act as the regulator.

Several experts have said that multinational companies would likely dominate the downstream sector due to the big investment required and the risky nature of the business.

Entering the downstream business -- whether it is the processing or distribution -- needs as great an investment as the upstream sector, but typically produces lower returns, particularly considering the weak purchasing power of most Indonesian consumers.

Pertamina, experts said, would probably become the sole local company to compete in the sector since it already had all the infrastructure needed.

Ari said that it would cost about Rp 5 billion (US$538,909) to build one gas station, excluding the price for the land.

Currently, Pertamina owns and operates only seven gas stations in Jakarta, Palembang, Medan, Makassar and Surabaya out of around 2,537 across the country.