RI braces for liberalization of downstream oil and gas sector
Leony Aurora, The Jakarta Post, Jakarta
Following is the first of a series of articles planned in anticipation of the liberalization of the country's downstream oil and gas sector later this year.
Like a family anxiously waiting for a baby to be born, oil and gas players, as well as customers, are eagerly anticipating Nov. 23, the day state oil and gas firm Pertamina's monopoly in the downstream sector ends.
For customers, it means they will see names other than Pertamina on gasoline stations, like Petronas and Chevron, and for once they will have a choice from whom to buy petroleum-based fuel.
With the introduction of Law No. 22/2001 on oil and gas, Pertamina will not be the sole entity importing fuel into the country and distributing it through some 2,600 pump stations throughout the archipelago.
The new law also enables the liberalization of the other segments in the sector, namely refining, storage and transportation.
Pertamina's regulatory function over the downstream industry is also being transferred to the Downstream Oil and Gas Regulatory Agency (BPH Migas), formed in 2002.
"Our task is to ensure the distribution of fuel to all parts of Indonesia," chairman of BPH Migas, Tubagus Haryono, told The Jakarta Post recently.
The bulk of the downstream sector in Indonesia is the distribution of subsidized fuel products -- gasoline, kerosene and diesel fuel -- for small-scale enterprises, households, transportation and state power firm PLN.
BPH Migas, together with the Ministry of Energy and Mineral Resources, is still drafting the concepts of public service obligation (PSO) for the regulated, or subsidized, fuel. Despite that, many multinational, as well as local, companies have applied for licenses to operate, at least to sell unregulated fuel.
According to data from the ministry, PT Intanjaya Agromegah and PT Berkah Refinerindo Utama have secured principal licenses to build refineries capable of processing 300,000 barrels per day (bpd) -- one in Parepare, South Sulawesi, and another in Trenggalek, East Java, respectively.
Applications from seven other companies are currently under evaluation. One of them -- the smallest refinery with a capacity of 800 bpd in Musibanyuasin, South Sumatra -- is under construction.
Nine companies, including PT Nicor Lubrindo Pratama, PT Tranaco Utama and Pertamina subsidiary PT Elnusa Petrofin, have got licenses to store fuel and crude oil, with expected investments reaching US$420 million.
Fuel storage facilities of Nicor, with an investment of $150 million, are reported to be under development.
But the most attractive is the retail business, with Malaysia's Petroliam Nasional Bhd (Petronas) and Dutch's Shell already securing preliminary licenses to open gasoline stations and sell nonsubsidized fuel, such as high-octane products similar to Pertamina's Pertamax and Pertamax Plus.
"Companies with preliminary licenses will get permanent ones after showing their commitment to building a network here," said Tubagus.
According to BPH Migas, Petronas' local unit PT Petronas Niaga Indonesia is ready to open 200 gas stations here. The first one will open in December in Greater Jakarta. The company plans to expand to Bandung, Surabaya and Semarang.
Shell, meanwhile, is planning to build 400 outlets over eight years.
Local companies coming into the retail sector include Pertamina subsidiaries PT Elnusa Petrofin and PT Elnusa Harapan -- which plan to build 200 pump stations over five years -- PT Sigma Rancang Perdana, PT Pandu Selaras and PT Petroleum Limas.
According to Government Regulation No. 36/2004 on downstream oil and gas activities, business entities can only own and wholly operate 20 percent of their total network -- a system called company owned, company operated (COCO).
"For the rest (80 percent), they have to cooperate with local parties under the systems of CODO and DODO," said Tubagus.
CODO stands for company owned, dealer operated, which means the gas station may be owned by the company but operated by a local partner. DODO is dealer owned, dealer operated, meaning the company supplies only the fuel, but the outlet is owned and operated by another firm, said Tubagus.