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.