With better services, high grade fuels

With better services, high grade fuels Pertamina ready to enter free competition

A new dawn is coming out at the horizon for the downstream oil sector in the country. An era of competition, where national and multinational companies race to bring the best services and prices for motorists, households, and industries alike, is already starting.

In an attempt to open the market in line with global trend around the world, the government has regulated, with the introduction of Law No. 22/2001 on oil and gas, that starting November this year, state oil and gas firm Pertamina will no longer hold monopoly in the distribution of fuel throughout the vast archipelago.

Pertamina's exclusive rights has been extended until Dec. 31. but it is a matter of weeks that the free competition will start. For customers, it means beginning Jan.1, they will see logos other than the blue-red-and green 'P' of Pertamina -- the state enterprise's new icon.

They will also have more selections to buy petroleum-based fuel, for example from Royal Dutch Shell Plc. Despite having a big head start from the competitors, Pertamina wastes no time in preparing for the newfound competitive environment, taking numerous measures to ensure that customers get even better services from the company.

"We have to be focused on the customers, not on the competition," Achmad Faisal, Pertamina's acting deputy for trading and marketing, said recently. "If we care for the customers, they will still use Pertamina's products," he said confidently.

It will be some time yet before the competition will really kick in. Shell has opened its first outlet in Lippo Karawaci in Tangerang, west of Jakarta, selling unsubsidized high-octane premium gasoline, with the second station in South Jakarta already nearing completion.

Unsubsidized fuel, however, makes up only 5 percent of the total distributed in the country. The bulk of the business lays in selling subsidized fuel of premium gasoline, diesel fuel, and kerosene, which this year is expected to reach 59.6 million kiloliter (kl).

As the government has ruled that any company wishing to participate in the tender to distribute subsidized fuel must have pump stations outside densely-populated Java, Pertamina will most likely be given the responsibility to ensure that all citizens be served for another year.

Nevertheless, Pertamina has already made preparations, for example by simplifying the procedures needed to build gasoline stations.

Potential investors need only to log onto Pertamina's website -- www.pertamina.com/spbu -- to fill in the applications, which will be reviewed immediately. Contracts can be signed within as soon as 15 days, should they meet all the requirements, Faisal said.

"We have completely transformed the system," said Faisal. Pump stations will be connected online and fuel can be requested electronically, slashing precious time and paper works.

"Pump stations' management only need to sit and watch everything being taken care of for them," said Faisal.

In the franchise system, new pump stations, to be classified into five categories based on the estimated daily offtake, will pay a royalty per five years, which will be returned in the form of trainings, monitoring, marketing, and uniforms. "We will also help them with the management of the station," said Faisal.

In an attempt to minimize fuel theft -- a major problem for many gasoline station owners -- Pertamina will also take over the management of the transportation of the goods. "We will guarantee that the loss remains within the tolerable limits," said Faisal.

Pertamina owns some 40 units of the 3,157 pump stations operating across the archipelago.

The business of pump stations is booming. The stations, which take 4 percent off the subsidized prices as sales margin, are enjoying higher revenues after the government hiked fuel prices by an average of 126 percent in October.

With the opening of the market, however, Pertamina will have the power to determine the sales margins. "Stations that offer better services will get a higher margin and vice versa," said Faisal. "It'll be an incentive for stations' owners to improve their services," he added.

Services of the bigger pump stations will also include air- filling for tires and window washing. These additional benefits, however, will depend on the amount of cars and motorcycles standing in line at any given moment, as Pertamina does not want that the primary service of filling out gasoline be hindered.

"I believe that with competitive prices, correct metering and good services, Pertamina will remain as the company of choice for our customers," said Faisal.

Another front in which Pertamina is already making innovative moves is with the industrial users. Since November, the state firm PT Pertamina is offering its own discounts of between 1 percent and 4 percent for oil-based fuels sold to industry, depending on the consumer's monthly usage.

"We have signed contracts with 38 industrial customers last month to supply fuel for one year with the discounts," said Faisal. "With the contracts, the supply and quality of the fuel will be thoroughly guaranteed."

To attract consumers, Pertamina will also offer other services. The company will deliver fuel to the customer's front door instead of having them come and buy fuel at the depots. "If Pertamina handles the transportation, we can ensure that the loss is tolerable," said Faisal.

Another option that may become available in the near future is for industries to order special types of fuel for their needs. "We are studying the possibility to customize fuel compositions for specific customers," said Faisal.

As the fuel business is expected to expand significantly, Pertamina has made plans to buy 32 new crude and oil-product tankers in the next three years. The firm is rejuvenating its fleet to meet rising shipment volumes and replace old vessels.

At present, Pertamina operates a fleet of 33 tankers to deliver fuel and crude across the islands in the country.

"I am confident that Pertamina can come ahead of the competition," said Faisal.

"And when Pertamina is strong, the country and its citizens get the benefits, since all of the profit we garner will be returned to the state," he added.