Pertamina defends stance to keep downstream dominance

State oil and gas company Pertamina defended its plan to retain downstream majority market shares and arguing that unbundling Pertamina?s monopoly by creating separate business entities in every process, as suggested by The World Bank, would only meant higher prices for consumers.

?If each process is from crude importation to fuel distribution is carried out by separate business entities which would require economic margins for their survival, then end-consumers would end up paying much-much higher fuel prices. Process integration is the key to enable Pertamina to deliver fair prices to consumers,? said Pertamina?s downstream director Muchsin Bahar on a sideline of Independence ceremony Saturday.

?Pertamina is still asking for the government to transfer all supporting assets including import terminals, fuel storages, refineries and pipelines to enable us to become market leader and control downstream market and to make sure other future players do not abuse the market,? he said.

Muchsin dismissed the allegation that transferring such assets would mean Pertamina could dictate the market as it liked and would eventually lost efficiency.

?Pertamina is 100 percent owned by the government. If there is indication that Pertamina is losing its efficiency or trying to unfairly dictate the market, then the government could fire board of directors any time. Government cannot do that if the market leader is private enterprise,? said Muchsin.

?Pertamina as market leader, could ensure fuel distribution to all over Indonesia at a very competitive costs. We have been doing that for the past 30 years and we can do that in the future, provided that we are equipped with adequate infrastructure.?

The World Bank, in its recommendation had strongly suggested that Pertamina?s monopoly be dismantled by not transferring all downstream supporting facilities to Pertamina and formed other state owned enterprises to manage the facilities. The World Bank also suggested that facilities such as storages, pipelines, and import terminals be opened for other players.

The Bank also questioned the government?s decision to maintain reserves of refined products to up to 25 days of national consumption, arguing that the associated costs would be significant and would ultimately have to be passed through to consumers.

?That?s a normal practice in many countries. In fact many counties have increased their national stock reserves requirement to 50 days. It?s a matter of national fuel supply security and I don?t think that should be compromised,? said Muchsin.

Petromindo.Com industry sources had stated that The World Bank?s recommendation is back by multinational oil majors who wanted to enter huge Indonesian market, but unwilling to invest money to build their own facilities.

?I think many foreign players now want to gain footstep to enter huge Indonesian market. If they have commitment to enter Indonesian market, the new downstream players should build their own facilities. They should build their own refineries and terminals,? said Muchsin.

Under the new oil and gas law, Indonesian market will be opened by 2005 the latest and new players, foreign and local, will be allowed to compete head-to-head with Pertamina. (alex)