Indonesian Govt Extends Pertamina's Pso Until Dec 31

JAKARTA, Nov 23 Asia Pulse - The Indonesian government has extended the authority of state-owned oil and gas company PT Pertamina to carry out its Public Service Obligation (PSO) on domestic fuel oil distribution until December 31.

Energy and Mineral Resources Minister Purnomo Yusgiantoro said here Tuesday the extension of the obligation was stipulated in Ministerial Decree no.2043/2005 as a follow up to Presidential Decree no.71/2005 on supply and distribution of certain types of fuel oil signed on November 16.

"The Ministerial Decree extends Pertamina`s assignment, which should have ended on November 24 to December 31 as a company that handle supply and distribution of subsidized fuel oil such as kerosene, gasoline, and diesel oil throughout Indonesia," he said.

Section 10 subsection 1 of the Presidential Decree stipulated the government would extend Pertamina`s authority if no company could fulfill qualification as supplier and distributor of subsidized fuel oil throughout Indonesia after November 23, the expiration date of Pertamina`s PSO.

Under the law No. 22/2001 on oil and gas, Pertamina would lose its monopoly on distribution of fuel oil in the domestic market four years after the imposition of the law.

The law allows private companies, both national and foreign companies, to move into distribution of fuel oil, including subsidized fuel in Indonesia.

"If there is no other players (after December 31), Pertamina will automatically handle the task. Do not expect that the system must be imposed in 2006," Purnomo said.

An official of the Oil and Gas Downstream Business Regulatory Body (BPH Migas), Eri Purnomo Hadi, said Pertamina might continue to carry out its obligation to distribute fuel oil until 2006 while private companies would only be ready to enter the market in 2007.

The minister said that from January 1, 2006 Pertamina would not use the "cost and fee" system as payment mechanism from the government.

Under the Presidential Decree, the minister would set fuel oil basic price which referred to the Mid Oil Platt`s Singapore (MOPS) after calculating distribution cost and margin for the company.

"The mechanism will use MOPS plus `alpha` (distribution cost and margin). With this mechanism, the government will press down as low as possible the alpha factor so that the subsidy will also be low," Purnomo said.

The cost and fee mechanism, Purnomo said, had harmed Pertamina as the company would not enjoy profit when the fuel oil price increased.

(ANTARA)

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