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Roundup: Indonesia to Liberalize Retail Fuel Sales

Posted on: Friday, 23 December 2005, 09:00 CST

Roundup: Indonesia to liberalize retail fuel sales

JAKARTA, Dec. 22 (Xinhua) -- From the first day of 2006, Indonesia's state-run oil firm Pertamina will no longer be the country's only fuel retailer.

The government has decided to end Pertamina's decades-long monopoly in retail fuel sales on Dec. 31, opening door to foreign oil companies whose retail presence here was previously limited to lubricant market.

The competition is heating up for the country's huge fuel market: an estimated demand of 60 million kiloliters in 2006.

Royal Dutch Shell was the first foreign firm to possess a retail fuel station in Indonesia, completed on Nov. 1 in the Jakarta suburb of Tangerang. The company has affirmed an ambitious plan to build 400 retail fuel stations across the country by 2013.

Malaysia's Petronas is following suit. An Indonesian official revealed Thursday the Malaysian firm has expressed interest in building 400 retail fuel stations on the main islands of Java, Sumatra and Kalimantan by 2011.

At least five Petronas fuel stations will be completed next year, said Erie Soedarmo, director of production and trade with the Ministry of Energy and Mineral Resources.

Similar to Shell, "Petronas will sell fuel with octane number above 92," he told reporters here.

As the battle began too early, Pertamina is making sure it will not enter 2006 empty-handed.

Pertamina recently signed agreement with Canada-based Accelon Energy System on production and sale of synthetic diesel fuel worth 6 billion US dollars.

"This is the biggest contract Pertamina has signed since the establishment 48 years ago," Pertamina president Widya Purnama said when announcing the deal on Nov. 25.

The factory will be built in East Kalimantan to begin production by 2008 with estimated capacity of 28 million barrels of synthetic diesel a year.

The diesel produced by the factory is designed to meet the Euro- 4 requirements.

The most important point in the agreement, Accelon must sell the synthetic diesel only to Pertamina for a 15-year period.

Indonesia has around 2,537 retail fuel stations, all displaying Pertamina's logo but mostly operated jointly between Pertamina and local partners. Pertamina has targeted to fully own at least 20 percent of the fuel stations.

The company plans to build 500 more outlets of its own. The company has said the next Pertamina fuel station will have mini market, car-washing service, workshop and even ATM.

The presence of foreign firms in retail fuel sales was warmly welcomed by the Indonesian Consumers Organization (YLKI).

"They will give us a choice," YLKI chairwoman Indah Suksmaningsih told Xinhua Thursday.

"Motorists can buy fuel of different qualities. Under Pertamina 's monopolistic retailing, we get the same product no matter we pay more or pay less," she said, adding that the state firm is lacking of transparency in both price-making and product quality.

But she reminded that whether the open competition will benefit Indonesian consumers remains to be seen.

The government has said at least 141 foreign firms have applied for licenses in downstream fuel business, but it seems that Pertamina will not lose its hegemony so quickly.

Most of the traded fuel, about 40 million kiloliters, will be sold still with government subsidy that will give an advantage to the state firm.

The real battle will be in the sale of fuel of premium quality with higher octane number, which doesn't enjoy government subsidy.

But Shell has announced readiness to sell subsidized fuel after the government raised fuel prices by the average 126 percent in October. The price of subsidized gasoline is now 4,500 rupiah (45 cents) per liter and diesel 4,200 rupiah (42 cents) per liter.

Source: Xinhua News Agency - CEIS

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