TEMPO.CO, Jakarta - The job of stamping out the murky oil mafia is not for the faint of heart. President Joko Widodo, during his election campaign last year, promised he would abolish the existence of an ominous oil trading syndicate in the country. Today, four months into the presidency, it's business as usual for the oil traders who for a long time have enjoyed a good run for their money. It is therefore imperative to remind the president that the lie of the oil-trading land has changed little since he took over the government. In short, very few reforms in this area have been sufficiently implemented to evoke any hope of change for the better.
It is generally understood that in the new scheme of things, the role of oil-trading company Petral, a subsidiary of state-owned oil and gas company Pertamina, would be significantly curtailed. Petral has long been suspected of assorted machinations in the process of acquiring the nation's oil supply. One replacement was Sonangol EP, an Angola-based company which had promised to sell Indonesia its oil at a discounted price of US$10 to 15 per barrel. This would mean a savings of about Rp 11 to 15 trillion for the state. Without question, an extraordinary achievement.
Furthermore, in accordance with the agreement signed by the governments of Indonesia and Angola, Pertamina and Sonangol were to form a joint-venture to continue the business of supplying oil for Indonesia. But to this day, that agreement has yet to be translated into anything concrete, except for plenty of excuses. As a consequence, the government must now purchase oil from Sonangol at world market prices and no discount. The hoped-for savings in the trillions of rupiah, remains nothing more than wishful thinking.
In the midst of such an uncertainty, at least 40 of Petral's suppliers, whose ownership had been reduced to a few hardened oil traders, marshalled their forces to resume their offensive on what appears to be a reopening of the competitive business arena. Oil acquisitions through Petral had to be officially implemented through bids and tenders. But it remains unclear how prices are exactly determined, and the identity of the winners of the tender process, especially since the prize tends to be rotated among this secretive network of traders.
In this vacuum, the suppliers of Petral are poised once again to secure their business strategy. Veteran players like Riza Chalid are reported to have offered oil supplies at a competitively discounted price.
Realistically, it is of little importance whether the best choice is between Petral or Sonangol. The two are business entities committed to gaining the highest possible profit. If Sonangol proves to have reneged on its promise and violated its agreement, the government should not hesitate to cut ties with the Angola-based company. The fact that Sonangol has close relations with NasDem Party politician Surya Paloh should not be an obstruction.
What should be of concern to the public is that the supply of oil is secured, its quality is assured and the price is economical. The disastrous case of importing Zatapi oil in 2008 should not be repeated. Oil supplier Zatapi claimed it could sell Indonesia oil at US$0.28 cheaper than world market prices. But Tempo's investigation revealed that the quality was much lower than the standard.
We must continue to remind President Jokowi of his promise to rid the nation of this oil and gas syndicate and urge Energy and Mineral Resources Minister Sudirman Said to give his unreserved support in the fight against this destructive scourge.
Reforming the oil and gas sector must be one of the government's top priorities. Other related issues, such as price determination and the right oil mixture formula must be equally transparent, as recommended by economist Faisal Basri, who heads the Oil and Gas Governance Reform Team. An effective management of oil and gas in the nation's extractive industry can only be achieved if their acquisition is implemented through a clear and transparent process. (*)
Read the complete story in this week's edition of Tempo English Magazine
