Liberalization in downstream sector will burden the public

The planned establishment of a regulatory body (Badan Pengatur or Batur) to supervise the country?s oil and gas downstream operation will only add burden to the public because the establishment of the body will only cause an increase in fuel production costs, senior oil analyst Kurtubi has said.

"If the companies involved in fuel processing activities are required to pay fee to Batur, the establishment of the body will only cerate a new bureaucracy in the fuel processing activities which will in turn result in the increase in production costs," Kurtubi was quoted as saying by Kompas.

Under the new oil and gas law, the state-owned oil and gas Pertamina is required to remove its exclusive rights in oil exploration and production, and in processing and distribution of fuel. The government has established a new agency called BP Migas to be in charge in oil and gas upstream activities and plans to set up another regulatory agency or Batur in downstream operation.

Kurtubi, who is also an advisor of Pertamina, said that the fuel processing would be more efficient and less costly if the state owned oil and gas company is given the chance to retain the rights in fuel processing and distribution activities.

"I am sure the public will oppose the transfer of fuel processing and distribution rights from Pertamina if the retail price of fuels are too high," he said. (*)