New Pertamina chief faces one-price fuel policy challenge
The new chief executive of the stateowned energy firm Pertamina faces 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 remote areas and far-flung islands of the vast archipelago.
Elia Massa Manik was appointed by Pertamina’s shareholders on March 16, more than a month after his predecessor Dwi Soetjipto and deputy director Ahmad Bambang were ousted because of what the government — its majority shareholder — said was a leadership problem and a lack of teamwork. Mr Dwi’s success in reducing endemic corruption in fuel procurement was also said to have upset some influential figures.
Pertamina has to consider more in its operations than merely making a profit, according to Kurtubi, a lawmaker on the House of Representatives committee that oversees energy and mineral resources. He cites a clause in the constitution dealing with exploitation of natural resources for the benefit of the public.
Article 33 in the 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”.
“The one-price fuel policy is a constitutional mandate. Pertamina could do it as long as the cost is efficient,” Mr Kurtubi, who goes by one name, told Asia Focus. “The new president-director (Mr Manik’s official title) has to be able to operate the company without contradicting the constitution.”
Mr Widodo announced the one-price fuel policy last October 2016 during a visit to Yahukimo, a district near the Indonesia-Papua New Guinea border in the easternmost province of Papua. Its remote location and lack of infrastructure mean that fuel can cost up to a dozen times more than the normal price of 6,450 rupiah (16.8 baht) per litre for petrol and 5,150 rupiah (13.4 baht) per litre for diesel. The policy is expected to cost Pertamina about 800 billion rupiah (2.1 billion baht or US$60 million) annually.
Maryati Abdullah, the national coordinator for PWYP Indonesia — a civil society coalition that promotes energy and extractive industry governance — says the oneprice policy would be viable if Pertamina could import crude oil at a more affordable price and refine it in its own facilities.
“They could start by revitalising existing, old refineries so they could increase production output, while also remaining committed to developing new ones,” she told Asia Focus.
Fahmy Radhi, an economic energy analyst from Universitas Gadjah Mada in Yogyakarta, agrees that that having its own production infrastructure could give Pertamina wider fuel distribution coverage.
“If it had [more of ] its own refineries, Pertamina wouldn’t have to import up to 650,000 barrels per day. This is a huge amount that the oil and gas rent-seekers have been cavorting around with,” Mr Fahmy told Asia Focus.
Mr Kurtubi said cutting fuel imports should be high on Pertamina’s agenda under Mr Manik’s leadership.
“It should develop its own refineries so that Pertamina can produce its own fuel to meet domestic demand,” he said, adding that refineries also have a multiplier effect in terms of creating jobs and improving the local economy in areas where they are situated.
Mr Manik, formerly president-director of PT Perkebunan Nusantara (PTPN) III, the holding company for 14 state plantation firms since April 2016, is an alumnus of Bandung Institute of Technology and Asean Institute of Management.
He also led Pertamina’s oil and gas services subsidiary, PT Elnusa from 2011-14 and has held positions in the private sector including the consumer goods company PT Indofood Sukses Makmur, the pulp and paper company PT Kiani Kertas, the property developer PT Jababeka and the state-owned bank PT Bank Negara Indonesia (BNI).
He is credited with cleaning up about 16 trillion rupiah (41.6 billion baht) in non-performing loans at BNI and saving Elnusa from the brink of brankruptcy. The latter earned 123 billion rupiah in profit in 2012 after losing 42 billion the year before. Elnusa continued to make more profit until the end of Mr Manik’s tenure.
In his first address to Pertamina’s employees, Mr Manik said he would focus on strengthening the company’s human resources and on maintaining the improved performance seen in recent 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 Mr Dwi in 2015 disbanded Pertamina Energy Trading Ltd (Petral), a Singapore-based subsidiary handling crude and fuel oil imports and a notorious 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,” Mr Manik said.
Gatot Trihargo, the financial, survey and consultation services deputy at the Ministry of State-owned Enterprises said Mr Manik’s appointment was made after Rini Soemarno, the state-owned enterprises minister and several others conducted a selection process.
PWYP Indonesia had urged the government to select the new Pertamina chief in a transparent, credible and independent manner, following the Feb 3 ouster of Mr Dwi.
Ms Maryati said the government didn’t say much about why it chose Mr Manik, but given his public track record for improving corporate efficiency, she holds a favourable view that Mr Manik would be effective at human resources planning and restructuring various executive positions.
“We also hope he will not be swayed by certain political interests,” she added.
“If it had [more of] its own refineries, Pertamina wouldn’t have to import up to 650,000 barrels per day. This is a huge amount that the oil and gas rent-seekers have been cavorting around with” FAHMY RADHI Energy analyst, Universitas Gadjah Mada