Petroleum, Policy and Protest

PT Pertamina is given the monopoly to extract and distribute the natural resource from the Indonesian soil. Since its incorporation, it is meant to be the largest oil producer who would bring wealth to the country. In the 1970s there were many companies like Petronas send their excutives to learn from Pertamina. Ironically, Petronas which is often mentioned as the little brother of Pertamina, is much bigger (3 times larger) than Pertamina today. The operations of Petronas go beyond Malaysian shores: the collaboration with BP, Exxon and Shell enabled Petronas to expand its operations in the African soil. Petronas can afford to sponsor the F1 race in Sepang and housed its staff in the glamorous Petronas Twin Tower in Kuala Lumpur. Pertamina sit down and watch, only can dream to be as successful as its little big brother. With the liberalization of the Indonesian oil distribution, Pertamina is set to lose much more money.

Pertamina was supposed to be the only company that has the right of exploration in the country. The monopoly given had made it complacent and did little to transform itself. Pertamina seldom use is own resources to drill and process the oil. Rather, it prefered to operate on the basis of joint venture exploration, in which foreign partners like BP and CNOOC would operate the facilities, extract the oil, and give a little share of oil to Pertamina. Pertamina can obtain the oil without the need to work much. Just sit down and the oil will be delivered to the doorstep. It is little wonder that Pertamina today only controls about 8% of the oil fileld in Indonesia, let alone venturing abroad. The profit earned by Pertamina mainly come from the sale of the petrol to the end users.

The lack of foresight of Pertamina and the government landed Indonesia as the only OPEC member to import the petrol for consumption. In fact, much of the country’s export of the oil is not the export by the government. Exports of oil are carried out by foreign oil companies that send the crude oil to be distilled in foreign countries like Singapore. Indonesian never able to earn much from the rising oil price today. Indonesian is not in control of the oil. While the oil countries of Arab sheikdom benefited from the rising oil price, the Indonesian government had to increase the price of the petroleum because of the high import price.

The rising in the oil price is the contributing factor in the rise in the consumer goods and foodstuff. During the President Suharto era, the daily necessities were cheap because he kept the price of the oil low. Indonesia then had the ability to sell the price at a subsidized rate without giving subsidy because the country was drilling the oil from its very own soil by its own company. The production cost was low, the retail price was also low although the international price was high. Today, even though the oil was drilled from our soil, BP and Shell would send the crude oil to Singapore, to be reprocessed only to be sold again to Pertamina as the processed oil.

In terms of the use of revenue from oil, Indonesia screwed itself up again. Sweden and East Timor adopting a system where the revenue from the sale of oil is invested and only the interests are being used for development. Indonesia has none of such system. We just spend whatever we dig. So when the oil reserve is exhausted, there is nothing else we could rely on. Indonesia used the money from oil on financing mega projects that looked grand but bring little return.

The abundance of oil has been a cursed blessing for the nation. Instead of enriching the people, it crippled the nation, make the people become lazy, stop innovating and take things for granted. With the news that the oil reserve of the country could last for the next 40 years, I hope that this can be the necessary evil to shake up Pertamina and change the mindset of the officials. It is still not too late.