Megawati signs downstream agency decree

President Megawati Sukarnoputri has signed a decree establishing a regulatory agency to manage oil products and their distribution along with natural gas pipeline transportation, an official said on Friday.

Besides managing oil products, the downstream regulatory agency would authorise private companies to distribute oil products to remote areas in Indonesia, said a copy of the decree, obtained by Reuters.

"We expect there will be more private companies investing in oil product retailing in Indonesia," Mines and Energy Ministry spokesman Nurwinakun said.

The decree, signed by Megawati on December 30, said the agency would also decide natural gas pipeline tariffs.

Indonesia ratified a new oil and gas law in 2001 that revoked state oil company Pertamina's monopoly over the lucrative sector, including oil products supply.

Indonesia also hiked domestic oil product prices, a sensitive move, by a maximum of 39 percent effective on January 2.

A Pertamina official, who declined to be identified, said the rise was part of efforts to sharply cut oil subsidies this year and entice oil companies to invest in Indonesia's oil product retailing sector.

Officials have said the fuel prices would be reviewed monthly, based on international market prices.

Fuel price hikes are a sensitive issue in impoverished Indonesia, and have triggered unrest in the past, especially from transportation drivers.(*)