Pertamina to lose contract-awarding rights

JAKARTA (JP): The government has finally gained support from House leaders for its plan to take over contract-awarding rights from state oil and gas company Pertamina, a move that will end the latter's decades-long monopoly of the country's oil and gas sector.

Minister of Mines and Energy Kuntoro Mangkusubroto said on Friday all faction leaders in the House of Representatives had agreed that Pertamina should cede to the government the right given the company in a 1971 law.

He said the faction leaders also agreed that the government could handle awarding and managing mining rights and would not have to establish a new state company for the purpose.

"We have passed the most crucial issue in the oil and gas bill. The government's functions (that have been delegated to Pertamina) will be returned to the government," Kuntoro said in a weekly news conference.

Kuntoro held a meeting with faction leaders Thursday evening after failing to reach agreement with the House's special team for the deliberation of the oil and gas bill on the issue despite weeks of lobbying.

The special team earlier agreed with Kuntoro on most items in the bill, including the lifting of Pertamina's monopoly on the country's oil and gas downstream sector.

But most members of the special team rejected the clause that required the transfer of the contract-awarding authority from Pertamina to the government.

Legislators said the right should be retained by Pertamina or provided to a new state company.

They also warned the government should not make business deals with private companies to avoid the possibility of litigation.

Many analysts predicted the deliberation of the bill could be deadlocked if Kuntoro and the House refused to compromise on the issue.

Kuntoro then moved to lobby faction leaders to support the bill.

Transition

Kuntoro noted they were still to reach agreement on the length of the transition period before the government assumed the right.

"This is the only issue that we have yet to agree upon during the debate of the bill," he said.

Under the bill, Pertamina will become a limited liability company and transfer its oil and natural gas contract-awarding rights to the government by two years after the enactment of the law.

Kuntoro said the faction leaders demanded the government give Pertamina a longer transition period to allow it to become "a strong, reliable and competitive company" before it was stripped of its privileges.

"The term 'strong, reliable and competitive' is really abstract. How long does Pertamina need to become strong and competitive? The government is of the opinion that two years will be enough for Pertamina," Kuntoro said.

He said the government was engaged in intensive discussions with the faction leaders to determine the transition period.

"We shall not consult with Pertamina on this issue," Kuntoro said.

He was optimistic that the House would approve the bill on Aug. 23.

Pertamina was shaken recently by a report by independent auditor Price WaterhouseCoopers, which found the state company lost US$6.1 billion between 1996 and 1998 through corruption and inefficiency.

The report warned the company must enact changes at every level of its organization. (jsk)