Pertamina to undergo fundamental change

Pertamina to undergo fundamental change

JAKARTA (JP): Minister of Mines and Energy Kuntoro
Mangkusubroto pledged yesterday to introduce fundamental changes
to the operations of state oil and gas company Pertamina.

The minister said a massive restructuring would be carried out
to boost efficiency and turn Pertamina into a world-class
enterprise.

"We shall make Pertamina a world-class oil company by 2003,
just like Petronas (of Malaysia)," Kuntoro said.

To achieve that, he promised to first root out the corruption,
collusion and nepotism that has long gripped Pertamina's
operations and caused inefficiency.

Pertamina is long considered by people as the country's worst
symbol of nepotism due to the fact the company awarded most of
its contracts and projects to former president Soeharto's
children and cronies during his 32-year presidency.

"I don't want to blame a certain group of people. Former
directors of Pertamina and officials at the Ministry of Mines and
Energy might also have been involved in nepotistic practices,"
Kuntoro said.

Kuntoro recently ordered Pertamina to list all its contractors
and suppliers who are linked to Soeharto and former company and
government officials.

"My goal is to make Pertamina an efficient company and have an
orderly administration. I will finish them (the contractors and
suppliers) off, whoever they are, as long as their operations are
in conflict with this goal," Kuntoro said.

Thus far, Pertamina has found at least 120 companies which
landed projects from Pertamina through political connections and
other unsavory business practices. The number could be higher as
the investigation by the state company is still ongoing.

Pertamina has yet to reveal the list but analysts believe it
includes Perta Oil Marketing Ltd and Permindo Trading Oil Co.
Ltd, from which Pertamina has been obliged to buy imported fuel
and crude oil for decades.

Sources say Perta is 30 percent owned by Pertamina, 20 percent
by Pertamina's pension fund, 25 percent by the Nusamba Group,
controlled by Soeharto's crony Mohamad "Bob" Hasan and 25 percent
by Soeharto's youngest son Hutomo Mandala Putra, alias Tommy.

Permindo is 35 percent owned by Pertamina and 65 percent by
Mindo Petroleum. Mindo is owned by Bambang Trihatmodjo (14.1
percent), Soeharto's cousin Sudwikatmono (20.6), Soeharto's son-
in-law Indra Rukmana (14.1), Nirwan Bakrie (22.8), Syarief
Sutardjo (7.6), Mohammad Tachriel Sap'ie (7.1), Rossano Barack
(7.1) and Aminusal Amien (6.6).

Soeharto's family and cronies also control the shipping of
crude oil and liquefied natural gas (LNG) and the development of
LNG plants.

Reform

Kuntoro said he had revoked the decree issued by the
ministry's Directorate General of Mining which granted PT Artha
Daya Coalindo the monopoly over the trading of the coal received
by the government from all coal mining contracts of work.

The existing law requires coal mining contractors to hand over
13.5 percent of their output in royalties to the government.

This is valued at about Rp 400 billion (US$36 million) per
year.

Former director general of mining Adjat Sudradjat granted the
monopoly to the company late last year on the approval of then
minister of mines and energy I.B. Sudjana.

Informed sources say Artha Daya is owned by businessmen linked
to Soeharto and Sudjana.

Kuntoro has also revoked the decree issued by Sudjana which
transfers the right of licensing mining contracts of work from
the director general of mining to the minister.

Sudjana issued the decree in 1996 when the Directorate General
of Mining was led by Kuntoro.

Beginning in June, the licensing right will be returned to the
Directorate General of Mining, he said.

Kuntoro promised to root out collusion, corruption, and
nepotism at the ministry in response to the public's demand for
reform and clean government.

He pledged to revamp all mining and energy legislation to
boost investment in the sector.

The ministerial offices would also be revamped to create "an
efficient, public-service-oriented, and modern bureaucracy in
anticipation of the 21th century," he said. (jsk)