Indonesia searches for a new top oilman
Indonesia has two weeks left to determine who will be the next leader of the state-controlled energy company Pertamina, after its two top executives were ousted on Feb 3 because of what its major shareholder said was a lack of teamwork.
While the government attributes the removal of reform-minded CEO Dwi Soetjipto and deputy Ahmad Bambang to a “leadership problem”, others suspect the move was politically motivated. Analysts have urged the government to select the new chief exceutive in a transparent, credible and independent manner.
“The new president director should be a professional from the oil and gas sector and of integrity because whoever is appointed will manage state-owned assets worth hundreds of trillions of rupiah,” Fahmy Radhi, an energy analyst from Universitas Gadjah Mada in Yogyakarta told Asia Focus.
Yenni Andayani, who was Pertamina’s director of gas and renewable energy, has been appointed as acting CEO by the board of commissioners, which was given 30 days to appoint a permanent leader following the dismissals. A graduate of Padjajaran University law school in Bandung, West Java, she started her career with Pertamina in 1991.
Fahmy, who was a member of a government-appointed team set up to reform the oil and gas sector, said the next chief executive should not have any connection to graft cases, should never have been investigated for graft or even summoned by investigators as a witness, and should be independent and not beholden to any individuals or factions in the Ministry of State-owned Enterprises.
“Those are the three requirements that President Joko Widodo should refer to when appointing the new Pertamina CEO,” he said.
Pertamina chairman Tanri Abeng said the changes were not connected to media reports that Bambang, a longtime Pertamina director, was being questioned in connection with a corruption case linked to procurement of vessels by a Pertamina subsidiary. “There was no link to that,” he told Reuters.
Publish What You Pay (PWYP) Indonesia, a civil society coalition for extractive industry governance reform, also urged the government to conduct the selection process with transparency to find a person with integrity and commitment to continue the reforms under way in the oil and gas sector, especially in the procurement of crude oil.
Maryati Abdullah, the national coordinator for PWYP Indonesia, said Pertamina was set to take over several oil and gas fields where contracts are expiring and to revitalise some refineries, including Cilacap in Central Java, Balikpapan in East Kalimantan and Dumai in Riau. In addition, more downstream projects to strengthen the country’s energy security are in the pipeline.
“We can’t afford to have a new president director who doesn’t have the capability to manage those huge assets,” she said, adding that an open, fit and proper selection should be conducted by an independent team to assure the public that the new appointee is free from the influence of any interest groups or the notorious oil and gas mafia.
Publish What You Pay is a global organisation that works to hold governments and companies to account for the ways in which natural resources are managed. Transparency of oil and gas contracts, notorious the world over for being inflated to account for bribes, is one of its goals. The movement was dealt a setback recently when the administration of President Donald Trump rescinded a US law requiring oil and gas companies to publish details of payments they made to governments abroad.
“The president director of the biggest state-owned enterprise should be free from [the influence of ] rent seekers,” said Fabby Tumiwa, director of the Institute for Essential Service Reform, part of the civil society coalition.
The shake-up has surprised many, given the sacked chief executive’s good performance in reforming governance at the oil giant, long associated with the tangled web of the oil and gas mafia.
Dwi was appointed CEO in November 2014 by President Widodo, and has overseen efforts to eliminate corruption and slash fuel imports, including by developing
domestic refining capacity. Dwi had built a reputation as a clean executive during his tenure as president of the state-owned cement maker Semen Indonesia.
The former CEO also oversaw a cost-cutting exercise that resulted in a strong financial performance last year. Unaudited results for 2016 showed that while Pertamina’s revenue fell 14% to $36.4 billion, profit more than doubled to $3.14 billion, Nikkei Asian Review reported.
Gadjah Mada’s Fahmy said Dwi’s most notable achievement was to disband Pertamina Energy Trading Limited (Petral) in 2015. The Singapore-based Pertamina subsidiary handled crude and fuel oil imports, on which the state enterprise held a virtual monopoly, and was notorious for being an oil and gas rent-seekers’ den.
Sudirman Said, the energy and mineral resources minister at the time, said in 2015 that Pertamina was able to save 250 billion rupiah per day following Petral’s dissolution.
“It showed that Dwi had integrity because he was able to disband Petral,” said Fahmy. “But I have reasons to believe that his dismissal was somehow an intervention from those who can’t benefit anymore from the oil import trade that Petral used to handle.”
The dismissals of Dwi and Ahmad were followed by the sudden abolition of the deputy director position. The position was not originally in the company’s organisational chart and was created only last October.
Abeng said the board of commissioners’ aim in creating the position of deputy was to allow the president director (the old state enterprise job title, since changed to CEO) to focus on the most important sectors such as upstream industries megaprojects, while the deputy would focus on the downstream business and developing the renewable energy sector.
“But what happened was a mismatch. There was no teamwork,” he said during a news conference, while acknowledging that sometimes structure makes the teamwork ineffective.
Gatot Trihargo, the financial, survey and consultation services deputy at the Ministry of State-owned Enterprises, said the ministry was aware of the situation and decided that it should not be allowed to drag on. What the company needed, he said, was teamwork instead of an “individual player”, while leadership from senior executives was crucial to accelerate decision-making process.
Rini Soemarno, t he State-owned Enterprises minister, said the board of commissioners had pushed for the dismissals and that President Widodo eventually acquiesced.
“We are aware that Pertamina had a good performance in 2016 and has some very challenging projects this year. ... Consequently, we need to restructure the board of directors. Hopefully, the [new] board of directors will be more solid and united in achieving the company’s targets,” Gatot said.