State-owned energy giant Pertamina has been struggling to realize the governments plan to introduce a fixed fuel price across the archipelago amid mounting burdens from subsidy programs.
Pertamina has claimed that, as of May it had been able to fully implement the one-price fuel policy with the establishment of fuel distribution agents in 21 locations nationwide, including 10 in Papua and West Papua, both of which are included in the so-called "3T regions,” referring to the country’s frontier; outermost and remote regions.
As a result, the company said that prices of its subsidized gasoline Premium, which has a research octane number (RON) of 88, and subsidized diesel Solar have now dropped to Rp 6,450 (49 US cents) per liter and Rp 5,150 per liter, respectively, from a previous retail price that could have reached Rp 100,000 per liter.
The company aims to establish four more distribution agents in June, two of which will be located in North Sulawesi, while two others will be in Maluku and North Maluku.
If this happens, Pertamina will be able to implement the policy in 25 locations, or nearly half of its original target of 54 locations throughout 2017. It will also penetrate 50 new locations next year and 46 locations in 2019.
“Moreover, there are 13 distributor agents that are in the final development phase and ready to operate soon,” Pertamina marketing director M. Iskandar said on Tuesday during a hearing with members of the House of Representatives’ Commission VII overseeing energy.
“This is in line with the government’s goal to implement the policy in 150‘locations [by 2019].” The Downstream Oil and Gas Regulatory Agency (BPH Migas) has recently called on Pertamina to expand the policy to include 237 locations across the country a move that may further encumber the company.
At present, Pertamina has only stated its readiness to implement the governments one-price fuel policy in 150 locations by 2019 because of high subsidy costs it has to bear, including to development of mini gas stations as well as premium, oil and diesel fuel agents (APMS) in remote areas across the country
“We just want to focus on these 150 locations, because you have to know that what happens on the field is not as easy as what is stated on paper,” said Pertamina President director Elia Massa Manik. According to the company’s calculations, the construction of one APMS in a remote region with a capacity to store 30 barrels of fuel alone may require an investment of about Rp 1 billion.
This is why Pertamina has reported a loss of around Rp 5 trillion since the launch of the policy in October last year.
Moreover, Elia said that, as of March, the government still owed Rp 38 trillion to Pertamina in subsidies the company had paid in advance for the sales of subsidized 3-kilogram liquefied petroleum gas (LPG) canisters. The arrears eventually weighed on Pertamina’s financial performance. At present, the economic price of LPG is Rp 10,500 per kilogram, with a subsidy of Rp 5,750 when it is sold to the poor.
“The price gap is so high. The subsidy is even bigger than the price that people have to pay” Iskandar said. Pertamina started its kerosene-to-LPG conversion program in May 2007. From then until 2015, it claimed it had saved Rp 197.05 trillion in subsidies.
Jakarta Post, Page-13, Wednesday, June 7, 2017
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