New Pertamina chief faces one-price fuel policy challenge in a vast archipelago

The newly appointed president director of state-owned energy firm Pertamina, Elia Massa Manik, has a huge task ahead to carry out President Joko Widodo’s one-price fuel policy, in the face of inadequate infrastructure to distribute fuel to the country’s remote areas and far-flung islands in the Indonesian archipelago.

Maryati Abdullah, the national coordinator for PWYP Indonesia, a civil society coalition for energy and extractive industry governance reform, considers the policy is viable if Pertamina could import crude oil at a much more affordable price and refine it in its own refineries.

“They could start by revitalizing its existing, old refineries so they could increase its production output, while also remain committed to developing new ones,” she said.

Unit pengolahan cilacap

Pertamina refinery in Cilacap, Central Java. Photo: Pertamina.com

Widodo announced the policy in October 2016 during a visit to Yahukimo, a district near the Indonesia-Papua New Guinea border in the easternmost province of Papua. Due to the location and lack of infrastructure in Papua and the eastern part of Indonesian archipelago, fuel prices can cost up to a dozen time more from the normal price of 6,450 rupiah per liter for petrol and 5,150 rupiah per liter for solar. The policy is expected to cost Pertamina about 800 billion rupiah annually.

Fahmy Radhi, an economic energy analyst from Universitas Gadjah Mada in Yogyakarta agrees that having its own production infrastructure could give Pertamina wider fuel distribution coverage.

“If it has its own refineries, Pertamina won’t have to import up to 650,000 barrel per day. This is a huge amount that the oil and gas rent seekers have been cavorting around,” Fahmy said.

Kurtubi, a lawmaker from the House of Representatives Commission VII which oversees energy and mineral resources said as a company drawn to constitutional obligation about exploitation of the country’s natural resources should benefit the people, there is more that Pertamina has to consider in its operation than merely making a profit.

Article 33 in Indonesia’s 1945 Constitution states that “sectors of production which are important for the country and affect the life of the people shall be controlled by the state and the land, the waters and the natural riches contained therein shall be controlled by the State and exploited to the greatest prosperity of the people.”

“One-price fuel policy is a constitutional mandate. Pertamina could do it as long as the cost is efficient,” Kurtubi, who goes by one name, said.

“The new president director has to be able to operate the company without contradicting the constitution,” he added.

Kurtubi also said that cutting fuel import should be high in Pertamina’s agenda under Manik’s leadership.

“It should develop its own refineries so that Pertamina could produce its own fuel to meet the domestic demands,” Kurtubi said, adding that the existence of a refinery in a certain area could also create multiplier effects that would boost the local economy and open new jobs.

Manik was appointed to head the company during Pertamina’s general shareholders meeting at the State-Owned Enterprises Ministry in Jakarta on March 16, more than a month after then-chief executive Dwi Soetjipto and deputy director Ahmad Bambang were ousted on Feb 3 because of what the government – its majority shareholder – was a leadership problem and a lack of teamwork.

Manik, who was the president director of PT Perkebunan Nusantara (PTPN) III, the holding company of 14 state plantations firms since April 2016, is an alumnus of Bandung Institute of Technology and Asean Institute Of Management.

In his first address to Pertamina’s employees, Manik said he would focus on strengthening the company’s human resources and maintaining Pertamina’s improved performance for the past years.

Sudirman Said, the then-energy and mineral resources minister, said in 2015 that Pertamina was able to save 250 billion rupiah per day after ousted CEO Dwi in 2015 disbanded Pertamina Energy Trading Limited (Petral), a Singapore-based Pertamina subsidiary handled crude and fuel oil imports for the state energy company and was notorious for being the oil and gas rent seekers’ den.

“There are many important projects we need to execute to achieve the national energy security goal, therefore it is important to gain trust so that we can adeptly carry out the projects,” Manik said.

PWYP Indonesia had urged the government to select the new president director in a transparent, credible and independent manner, following the Feb 3 ouster of Dwi.

Maryati said the government didn’t say much about the reason they appointed Manik, but given his public track record on improving corporate efficiency, she holds a favorable view that Manik would be efficient in his human resources planning and be able to restructure various executive positions to a more effective appointments.

“We also hope he would not be swayed by certain political interests,” Maryati said.

 

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