Thu, 25 Mar 1999

Pertamina to lose monopoly in 2 years

JAKARTA (JP): The government will end the monopoly extended to state company Pertamina to manage the country's oil and gas sector in two years, a minister has said.

Acting Minister of Mines and Energy Akbar Tandjung, who is also Minister/State Secretary, said on Wednesday that after the time had elapsed, Pertamina would operate as a limited liability company.

The two-year period stipulated in the oil and gas bill, currently being deliberated by the House of Representatives, is long enough for Pertamina to restructure itself, Akbar said.

The House's largest faction, Golkar, citing the economic crisis, said the time frame was inadequate for the company to relinquish its decade-long monopoly and become a limited liability company.

Earlier this month, Golkar, in a first plenary meeting to deliberate the oil and gas bill, called on the government to allow Pertamina to carry out the restructuring "gradually and in a systematic way".

The House's second largest faction the United Development Party (PPP), also expressed concerns during the first plenary session. It said rapid restructuring, at a time when the country was suffering economic doldrums, would force the company to lay off some of its 30,000 employees.

On Wednesday, during the second plenary session on the bill, Akbar said the government did not intend to extend the restructuring period.

"The transition period determined for the oil and gas bill has taken several factors into consideration, including asset recapitulation, change in the company's status and change in the (oil and gas) contracts."

Pertamina president Martiono Hadianto, earlier promised that all employees would be safe from lay-offs during the economic crisis.

The bill will amend the 1971 law, which grants privilege rights to Pertamina to manage the country's oil and gas sector.

The draft bill, which will lift Pertamina's monopoly on the oil and gas downstream sector, and revoke its rights to regulate the country's oil and gas industry, has sparked controversy.

Most factions in the House, including Golkar, the Armed Forces (ABRI) and the Indonesian Democratic Party (PDI), have expressed support for the bill, except for several points which they dismiss as too progressive and liberal.

They agree that by eliminating Pertamina's monopoly, the country's oil and gas industry will become more efficient.

Corrupt practices, allegedly rampant at Pertamina during the 32-year administration of former president Soeharto, would then stop.

PPP was the only faction that did not accept the government's plan to lift Pertamina's monopoly.

The faction feared that opening the downstream sector would lead to increased fuel prices.

Additionally, it did not believe that corruption in the country's oil and gas industry would end if governmental officials take over the monopoly.

Akbar said the government hoped that with the elimination of Pertamina's monopoly, the country's oil and gas industry would be free from corruption and be more efficient.

"The oil and gas bill is to make the country's oil and gas sector transparent and free of monopolistic practices, so that corruption, collusion and nepotism will be prevented."

In the first plenary session, Golkar also expressed reservations about the government's plan to allow foreign oil and gas companies to adopt oil and gas contracts other than the current obligatory production sharing contract (PSC) system.

However, Akbar said on Tuesday the government was happy with the contract scheme.

"For the moment, the government has no intention to change the PSC system, which has been relatively well accepted (by foreign oil and gas contractors)."

He emphasized that the government did not oblige contractors to adopt the PSC system in the bill, in order to anticipate developments in the world's oil and gas industry in the next several decades.

"Given that the law is expected to last for a long time, the government finds it necessary to be flexible in regulating (the oil and gas sector), to allow creativity and dynamism in planning and the creation of various types of contracts beneficial to the government," Akbar said. (jsk)