BPH Migas may open up subsidized fuel sales

Downstream oil and gas regulator BPH Migas may allow multinational firm Royal Dutch Shell and Malaysia’s Petronas to join state-owned oil and gas firm Pertamina in selling subsidized fuels. BPH Migas Representative Adhi Subagio Subono told The Jakarta Post that the designation of Shell and Petronas as subsidized fuel distributors, despite their lack of storage facilities, would benefit consumers as the increased competition would force Pertamina, currently the sole distributor of subsidized fuels, to provide better services and reduce prices. “New players could establish joint storage facilities, or if Pertamina agreed, they could share Pertamina facilities to overcome their lack of space,” Adhi said. Pertamina still holds the exclusive right to distribute subsidized fuels, despite the partial liberalization of the country’s retail fuel market in 2005. The government has said that the exclusive right continued to be awarded to Pertamina as no other operator has been able to meet the requirements, such as having sufficient distribution networks and storage facilities. As a result, newcomers like Shell and Petronas, have only been able to sell non-subsidized high-octane gasoline in Indonesia. Adhi said that the other mechanism being discussed involved a competitive tender. Indonesia, with a population of some 220 million people, represents an attractive market for retailers as motor vehicles account for almost half of national fuel consumption, which currently stands at some 60 million kiloliters per year. (September 26, 2007)