Pertamina to change status, sell profitable noncore assets

A'an Suryana, The Jakarta Post, Jakarta

State oil and gas company Pertamina will soon have to divest its ownership of a number of profitable noncore assets as required by a new government regulation, a government official said on Monday.

Ministry of Energy and Mineral Resources public relations chief TA Winakun said the government regulation was expected to be approved by President Megawati Soekarnoputri on March 31.

"The final discussion on the government regulation will be held on Thursday, but both sides (government and Pertamina) have basically agreed on the contents," he said.

The regulation will become a legal basis for Pertamina to become a limited liability company, a move that will help the company boost its competitiveness when the oil and gas sector is liberalized.

Winakun said that Pertamina had also agreed it would unload its noncore assets worth some Rp 4 trillion (US$450 million), such as a hospital, an air transportation company, hotels and property after it becomes a limited liability company.

Reports earlier said that Pertamina wanted to retain the noncore assets by setting up subsidiaries.

"If Pertamina can manage these assets well, why sell them?" company spokesman Ridwan Nyak Baik said.

But the government has insisted that Pertamina focus on improving its competitiveness purely in the oil and gas sector to allow it to compete with foreign players once the sector is fully open to free competition. The government has said that the proceeds from the sale of the noncore assets should be used to upgrade Pertamina's core operation.

One analyst said that the restructuring of Pertamina's operation, including the sale of its noncore businesses and creating a completely new corporate culture, was important if Pertamina wanted to compete with foreign companies.

Elsewhere, Winakun said that the divestment of the noncore assets would not create massive unemployment. He did not provide details.

Turning Pertamina into a limited liability company is a consequence of the enactment of Law No. 22/2001 on oil and gas that terminates Pertamina's decades long regulatory role.

The law will also end Pertamina's monopoly in the upstream oil and natural gas industry -- exploration, mining and refining -- by this year, and in the distribution of oil products by 2005.

The new law is expected to help boost investment in the country's oil and gas sector, which is essential to avoid the country from becoming a net oil importer by 2010 as many have predicted.

Last year, the government set up the Upstream Oil and Gas Implementing Body (BP Migas) to take over Pertamina's regulatory role in the upstream sector.

In the downstream sector, a separate body called the Downstream Regulatory Agency will assume Pertamina's role.

Pertamina's key noncore assets: PT Rumah Sakit Pusat Pertamina (hospital), PT Patra Jasa (hotels and restaurants), PT Pelita Air Service (air transportation), PT Patra Dok Dumai (shipping docks), PT Tugu Pratama (oil and gas insurance), PT Pertamina Tongkang (small vessels provider).