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July 20, 2008

Pertamina to go through inquiry over fuel imports
In a warm-up session Thursday ahead of a lawmaker inquiry over the country's fuel management practices, a panel of experts hinted at some irregularities in the import of crude oil and fuel products by state-owned oil and gas firm PT Pertamina, local daily Jakarta Post reported.

The company's partnership with oil brokers that have insufficient capacity, coupled with a lack of transparency in the import process, are blamed for causing imports of products more expensive than those of neighboring countries.

"Pertamina's imports of gasoline and diesel are always more expensive than those of ... Singapore," member of the House of Representatives' inquiry committee Tjatur Saptoedy said in a discussion.

Tjatur said that based on Pertamina's calculation, from January to May this year the company spent around 1.18 trillion rupiah ($128 million) more than similar transactions would cost in Singapore.

Pertamina imported about 321,000 barrels per day (bpd) of crude and between 300,000 and 350,000 bpd of fuel last year to help meet domestic need of one million bpd in fuel. The country's six refineries could produce only 652,000 bpd.

Pertamina has 42 brokers for importing crude and 50 for fuel products. However, according to Tjatur, only between five and seven brokers regularly win tenders for the import procurements.

"I am really wondering why these companies frequently win the bidding. Some of them don't even have the products or the refineries," he said.

Lawmakers also spotted in Pertamina's documents an irrational time arrangement in which bidding opens on July 14 and ends on July 18, leaving interested parties with next to no time to prepare for the bid.

"Only those who had obtained information beforehand would win the tenders," said Tjatur.

Pertamina president director Ari H. Soemarno, who was also a speaker in the discussion, said the firm had taken several measures to ensure its procurement bidding ran professionally.

He also argued the involvement of brokers was a common practice in the international oil and fuel market, except for Saudi Arabia and Kuwait which each sell their products directly.

Crude from the two countries is only suitable for Pertamina's refinery in Cilacap, according to Ari.

The House has set up an inquiry committee aimed primarily at investigating the causes of inefficiency in the country's energy sector, which has long been marred by corruption and collusion.

Scheduled to start in the middle of August, the committee is expected to unravel the current abuses in the country's energy sector, including in Pertamina and in the upstream oil and gas regulator BPMigas.

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