INTERVIEW: Pertamina unveils strategy to maintain domination in fuel market (Part I)
Monday, May 24 2010 - 02:27 AM WIB
Question: Pak Djaelani, you are in charge of marketing a number of products. One of them is petroleum-based fuels (locally known by the acronym BBM)). How do you see the demand for BBM, subsidized and non-subsidized ones, in the future? What is its annual growth?
Answer:The demand for the subsidized BBM will still grow higher. But it will depend on people?s activities. Although there are many cars and motorcycles, but if people have less activities, the consumption of BBM will decrease and the demand for the subsidized oil will not increase.
Let?s see as an example the case in 2007-2008 when land transportation business was in gloomy condition. Bus and train operators lost their businesses to airline companies, which sell tickets at the same price as or even lower than those of buses and train. Imagine at that time, airline tickets from Surabaya to Jakarta cost only Rp 200,000, the same price as the Medan-Jakarta airline tickets. As the land transportation services dropped, they used less BBM.
But there is another factor that affects the demand for the subsidized BBM. That is the growth of motorcycles. We see the demand for motorcycles is more than 5 million units per year. This is something unusual. I think there is no country like us in terms of motorcycle growth. Averagely, every Indonesian family has one or two motorcycles. Even the rich ones buy motorcycles for their housemaids to go shopping.
But in general, the consumption of subsidized BBM grows at an average of 4 ? 5 percent per year.
Will this trend continue for the next five years?
Yes, as long as there is no decision to apply a mass rapid transportation system. It is not only the case of Jakarta. It also happens in other cities, even in small cities. Usually, it only took me 15 minutes to go to Malang (from his home village near Malang in East Java). But now I need about one hour. It means more BBM is used. That is why Pertamina always asks for the increase of subsidized BBM supply. I think this should be a priority for the government to deal with. Pertamina as a state-owned company cannot do it on its own. If we do, we?ll get complaints from the general public.
But we?ve taken a number of initiatives to prohibit the use of subsidized BBM by certain industries. But then when it causes a negative impact, we will be held responsible as we have violated the regulation. Now we?ve urged the directorate general of oil and gas (of the energy and mineral resources ministry) and the oil and gas upstream regulator BPMIGAS to regulate that industries are not allowed to use subsidized BBM.
This year, the government and the House of Representatives have decided that the supply of subsidized BBM would be maintained at 36.4 million kiloliter. The BBM supply consists of 21 million kiloliters of Premium gasoline and 11.4 million kiloliter diesel oil. But actually, based on our data, the real demand for Premium gasoline is 23 million kiloliter and diesel oil 12 million kiloliter.
So the BBM growth was particularly driven by the growth of motorcycles. But that is for Premium gasoline. What is about the diesel oil?
The same case happens with diesel oil. The subsidized diesel oil is used by fishermen. The new minister of marine affairs and fisheries (Fadel Muhammad) has been all out in developing the fishery sector. As a result, the demand for the diesel oil has also increased.
This is what we have been asking for?that it?s okay the BBM supply won?t increase on condition that the government makes a regulation on this. It will become as a reference for us if we get complaints when we reduce the supply of subsidized BBM. Surely, such reduction will cause a long queue to get subsidized BBM.
I think currently it?s impossible to smuggle subsidized Premium gasoline out of the country. Where to can they smuggle it? Its quality is different with those in other countries. The consumers of RON 88 are only here in Indonesia.
The 36.4 million kiloliter supply is for 2010? But real demand is 10 percent above it?
Yes, it?s based on the growth I mentioned. How to arrest it? We have proposed to the government to secure the supply really needed. Beside PLN (state-owned electricity firm PT Perusahaan Listrik Negara), BBM for industries grow well despite the increasing number of competitors. We still survive and grow.
What is the market share controlled by Pertamina and PT Patra Niaga (a subsidiary of Pertamina)?.
Between 80 to 90 percent.
That means it is the market leader?
Yes it is. If there is any company trying to enter the market, that?s a challenge for Pertamina. If we lose, why then we lose? We?ll analyze. Perhaps, it is because of our services. If so then we have to apply excellent services to the industries so that they only need to pay conveniently. They don?t need to compensate the loss. They don?t need to think of other problems. This kinds of things that we sell to the industries.
What is the volume target this year?
About 8.7 million kiloliter. That?s only HSD (High Speed Diesel). The others are only in small quantities.
Now, you have seen competitors increasing. For example, Shell has entered Pulau Laut and made a direct connection with PT Adaro, and then KPC. How do you see it?
It?s only normal that buyers do not rely 100 percent on Pertamina. That?s normal. If we can get all, that?s also good.
I mean how do you maintain as a market leader amid the increasing number of competitors?
What we sell is continuity: continuity of services and prices. There are consumers who are more concerned with price, while the others are more concerned with services that include continuity of supply. We put both into considerations. There are consumers who do not like to see prices changing every two weeks. We accommodate their interest. And it?s been done by Pertamina. Pertamina is flexible, even on the matter of debt.
We used to be very rigid. Now, we?ve changed and we?re doing better. Some state-owned companies that previously decided to leave us, now they?ve returned to us. So, we have to keep our eyes open. We have to make sure no competitor ahead of us.
If our economy grows by 6 percent per year, what is the growth of BBM demand for industry?
Currently, only Kalimantan that sees a high growth. In other places, the growth is not so significant.
So you?ll be more intensive there ( Kalimantan )?
Yes. We?ve developed a floating storage there. We?ll increase the storage capacity.
Where else will Pertamina expand its infrastructure?
Our storage may be far away from buyers, but our BBM should be near to them. Our competitors also have hoarding tanks. We?ll take over them. How? By leasing their tanks. They will only receive supply (from us) and get paid for it. That?s my secret.
OK Sir. How about the development of fuel storage?
The development of Tuban fuel storage has been completed. It?s been in operation. What?s left is to dedicate it officially. The pipeline network development is facing a small problem, but it will be solved. Only some 12 kilometers more in Lamongan region left to be completed. The regional administration in Lamongan has asked that the 12 kilometers should not be passed through lands but through the sea. We follow the decision.
What is its storage capacity?
Almost 200,000 kiloliters. This is to supply East Java because until now East Java is the most critical in terms of BBM supply. Surabaya is very dependent on tanker ships. But Surabaya has been crowded with tankers, as we?re located in the general port of Surabaya. That?s why the stock there is only for five days. As it is crowded, we have to pay higher cost.
BBM consumption in East Java is almost the same as in Jakarta . Actually, we have a storage in Banyuwangi, but it is too difficult to distribute from there to central part of the province. So, we decided that we have to supply Surabaya through a pipeline from Tuban. We plan that in the future we?ll develop pipeline network from Tuban to the cities like Malang, Pasuruan, Keraton in central part of East Java. In Keraton we?ll also construct a storing facility.
What is the capacity of Keraton storage?
Not so big because it is supplied by pipeline. The pipeline is from Surabaya. Then we?ll close the storage in Malang . It will be supplied from Pasuruan. The distance will be shorter. Until now the BBM for Malang is supplied using railway services and tanker trucks. We also got problems due to the Lapindo case. As a result we have no alternative. If we supply through Mojosari, it will be very difficult as all people take the route. All day and night it?s always crowded.
So, I think the Garuda?s decision to move its landing from Surabaya to Singosari, the one owned by the Indonesian air force, is the right one. (To be continued)