TEMPO.CO, Jakarta - It is an open secret that there are often illegal practices in the procurement of oil from overseas. Brokers pretending to be traders look for profits by manipulating the price when there is a domestic oil deficit. These illegal practices by the oil mafia have continued for decades-and have cost the state hundreds of trillions of rupiah.
Due to the shortfall in domestic crude oil that can be refined in the country, state-owned oil and gas company Pertamina was tasked by the government to import fuel. The year-on-year increase in the demand for the oil means that imports are a necessity. In accordance with regulations, Pertamina must give priority to crude oil from domestic fields in its refineries before deciding to buy imported oil. There should be a clear calculation of the additional requirement before imports begin.
So, it seemed rather strange when at the end of August Pertamina submitted a plan to return 2.2 million barrels of crude oil to the Upstream Oil and Gas Regulatory Special Task Force (SKK Migas), and then turned around and ordered oil from overseas. The crude oil it returned was the government's share from its collaboration with contractors in October, November and December 2014. Pertamina claimed that it was unable to absorb the crude oil because it was carrying out maintenance on the Cilacap refinery for 35 days, from September to October.
Because of the sudden nature of this decision, SKK Migas rejected Pertamina's proposal. This was the right thing to do because Pertamina is only allowed to cancel purchases if it announces such an intention two months before it is due to receive the quota from the government. SKK Migas has a stake in Pertamina taking this quota because if it is refused, oil production will also be delayed. Even if it does refuse the oil, Pertamina should try to sell it to another party. It has since emerged that Pertamina's excuse for not being able to process all the oil is unjustified because not all refineries undergo routine maintenance.
The suspicion is that there is something amiss with this sudden move, especially since Pertamina insists on importing rather than refining crude oil produced domestically. We may be justified in suspecting that 'there may be money' behind the import plans, particularly since imports to date have been chaotically organized, and have frequently been associated with stories of oil mafia interference behind the scenes.
The Pertamina management should not forget that oil imports add to the pressure on the rupiah exchange rate. As it is, we must import around 400,000 barrels of crude oil every day, at a daily cost averaging US$36 million, or almost US$1.2 billion per month. Therefore it is certain that Pertamina's plan to increase imports will weaken the rupiah, which in the last week hit Rp12,000 to the US dollar.
With all these problems, Pertamina must retract the letter asking for the crude oil to be returned to SKK Migas. And the board of commissioners, which has the oversight mandate from the shareholders, should not allow the directors to continue with the import plan, if they insist on doing so. Furthermore, there should be an investigation to determine who is behind the policy. Tough sanctions should be imposed if it is proven that the import plan is a ruse by a few officials who want profits for themselves.