Pertamina ready to merge Pertagas with PGN

State-owned oil and gas firm PT Pertamina has completed a detailed study on the proposed merger between its subsidiary PT Pertamina Gas (Pertagas) and state-controlled gas distribution firm PT. Perusahaan Gas Negara (PGN), reports said on Tuesday.

Pertamina Vice President for Corporate Communications Ali Mundakir was quoted as saying that according to the study, the merged companies will become a new subsidiary of Pertamina, thus further strengthening the company?s downstream business.

He said in a statement that the company has submitted the results of the study to the State Minister of State Owned Enterprises Dahlan Iskan as the shareholder of Pertamina representing the government.

Dahlan said earlier that the decision on whether to go ahead or not on the planned merger between Pertagas and PGN will be made next year. He said that the proposed merger was aimed at creating a large-scale oil and gas company in the country.

The merger of PGN and Pertagas is expected to also help reduce conflict between the two firms in the gas distribution business, where PGN controls about 60 percent of the national gas network, while Pertagas as a unit of Pertamina have better access to the upstream side. The conflict has been further exaggerated with the government?s open access policy.

Dahlan said, however, merging Pertamina and PGN would not be easy. Some issues must be taken into account, such as how to optimize state revenue from the merger. ?Whether the merger will affect the company?s ability to seek loans must be analyzed,? he said.

Indeed, PGN Corporate Secretary Hery Yusuf was quoted by Kontan daily as saying that as an independent company, the publicly-listed PGN has a better leverage in seeking funds. If it?s merged with Pertamina, Hery feared that that leverage will disappear as being a state-owned firm will be faced with certain limitations in securing external funds. The government owns a 53 percent stake in the IDX-listed PGN. (*)