Pertamina: four-year transition period too short

State oil and gas company Pertamina's downstream industry director Muchsin Bahar said the four-year transition period granted by the new oil and gas bill to Pertamina to let go its downstream level into the free market was too short.

"Frankly speaking, many parties in Pertamina are pessimistic that this state company will be able to do business in accordance with the new oil and gas law. Looking into Pertamina's condition now, the transition period (of four years) to become a healthy company is too short," Muchsin said.

The situation would only worsen some of Pertamina's business units.

In addition, the implementation of the regional autonomy law (Law No. 22/1999), the fiscal balance law (No. 25/1999) and government regulation on the authorities of the central and regional administrations (PP No. 25/2000) all will affect the operation of Pertamina.

Muchsin said the new oil and gas law allowed foreign companies, and other private entities, including cooperatives, to enter oil and gas downstream industries, including in the distribution of fuels. And this will hit Pertamina especially hard.

"This way, Pertamina's monopoly in the downstream level would be lifted. And surely, Pertamina will be forced to enter a tight competition, because foreign oil and gas operators could enter Indonesia and open their downstream businesses like the one Pertamina is doing now," he said.

The basic change in the oil and gas industry with the new bill is that the roles of Pertamina in licensing both in the upstream and downstream level would be taken over by the government.

The government would then establish a managing body (Badan Pelaksana) to take over Pertamina's roles in the upstream level, holding the authority over the exploration and exploitation of the oil and gas industry in the upstream level.

Unlike Pertamina, this managing body would be an independent and non-profit institution.

Then the government would establish a governing body (Badan Pengatur) that would govern oil and gas industries at the downstream level, ranging from licensing, distribution, storage and other downstream businesses. (*)