PERTAMINA SUCKS

“PERTAMINA REALLY SUCKS & SUCKIER AS TIME GOES BY”

We just heard from Indonesia’s Energy Minister Purnomo Yusgiantoro that Indonesia is leaving OPEC when its membership expires at the end of 2008. Indonesia, the sole Asian member of the Organization of the Petroleum Exporting Countries (OPEC) since 1962 has now become a net importer of oil, the Energy Minister said.

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Indonesia’s daily oil output has fallen to 927,000 barrels per day (bpd) this year, down from 950,000 barrels a day in 2007. Its daily output falls short of the nation’s daily consumption of approximately 1.2 to 1.3 million barrels per day, according Reuters.

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If the production comes back to give us the status of net oil exporter then we can go back to revisit our membership with OPEC, speaking before the Jakarta Foreign Correspondents Club. Indonesia’s withdrawal from OPEC will help the Asian nation save an estimated $3.1 million (2 million euros) in membership fees per year, Purnomo noted.

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If OPEC had more solidarity with its members and helped those like us who are suffering from the current high price, it would have been a different matter, “Indonesia’s Parliament energy committee Chairman Agusman Effendi told the AFP.

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A parliament member Alvin Lie, a member of the house commission on energy, said he thought the OPEC discussions were “empty talk” designed to distract people’s attention from drastic fuel price rises at the weekend. Mr Lie said the savings made by leaving the 13-member organization, which has included Indonesia since 1962, would be minimal.

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The confirmation of Indonesia’s resignation came as the price for premium petrol rose from 4500 rupiah (51c) a liter to 6000 a liter under an across-the-board government reduction in fuel subsidies. The price rises averaged about 28per cent on all fuel types, in a move described yesterday by Dr Yudhoyono as “the best plan” to rein in a probable blowout in the budget. The move is expected to reduce total energy subsidies for the year from 186trillion rupiah, or 20 per cent of the national budget, to 141trillion rupiah.

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So what is the real reason Indonesia leaving OPEC? Is it because Indonesia has become an OIL IMPORTER and no longer OIL EXPORTER country or, is it because Indonesia is trying to save $3.1 million a year?

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Some analysts said the move might have been triggered by unhappiness about OPEC’s reluctance to increase output in the face of the recent price surge, which took the cost of a barrel of oil above $135. But others said it simply reflected the reality of the country’s flagging oil sector.

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Both reasons are understandable. But I believe there is an underlying reason for Indonesia to quit from OPEC membership and I don’t think it is because of the $3.1 million saving.

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Indonesia has massive foreign and domestic debts for over $136 billion dollar and so far nothing is being done about it. That is thousands times more than those little $3.1 million savings a year. Why then SBY’s administration is so eager to seek out of $3.1 million dollar saving?

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If you look at SBY’s 2007 budget that was approved the Parliament on October 17, it states that under his 2007 budget, Indonesia was projected to have about Rp. 40.5 trillion in deficit (-1.1% of GDP) based on OIL price $63 per barrel.

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First of all, this deficit figure Rp. 40.5 trillion is not a real sense deficit, it is more of metaphorical deficit because much of Indonesia’s liability in the form of public debts to foreign and domestic creditors was NOT included in that 2007 budget spreadsheet. Just like reconciling your bank account by EXCLUDING your credit cards debts in your balance sheet.

Secondly, Indonesia’s massive debts with PARIS CLUB (18 creditors) has been rescheduled into 40 years span from 20 years. That is how Rp. 40.5 trillion deficits were projected.

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Well, what did happen with the OIL price?

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In May 22, 2008 the OIL price jumped up to $135 per barrel. If the oil price per barrel remains that high above $100 per barrel, what will happen to SBY’s 2007 budget deficit?

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It is certainly not going to be Rp. 40.5 trillion, right? The figure can be 2.3 to 3 times higher than projected.

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He is facing Presidential re-election in 2009. Having over Rp. 100 trillion deficits in his budget under his watch certainly something that he dos not want to see. What did he do?

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He raises the domestic oil price; the most convenience but tragic way of handling the matter, sacrificing the million poor citizens that have been struggling with high cost of living. But does it address and solve the issue? No, it certainly not. The issue in Indonesia is not about the oil price, but it is about the oil production and consumption.

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The next question to ask is: Why OIL production in Indonesia is faltering over time? It does not get any better, it gets worse.

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Before I answer this question, let me share with you brief history of OIL production in Indonesia to give you a better picture.

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Indonesia’s oil production was formally governed by a quota allocation from OPEC. At the March 1991 OPEC ministerial meeting, Indonesia’s quota was set at 1.445 million barrels per day, below the country’s estimated production capacity of 1.7 million barrels per day. Indonesia’s quota represented about 6 percent of total OPEC production. About 70 percent of Indonesia’s annual oil production was exported on average during the late 1980s, but domestic consumption was increasing steadily and reached half of annual oil production by 1990.

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Indonesia’s oil industry is one of the oldest in the world. Oil in commercial quantities was discovered in northern Sumatra in 1883, leading to the establishment of the Koninklijke Nederlandsche Maatschappij tot Exploitatie van Petroleum-bronnen in NederlandschIndië (Royal Dutch Company for Exploration of Petroleum sources in the Netherlands Indies) in 1890, which was merged in 1907 with the Shell Transport and Trading Company, a British concern that had been drilling in Kalimantan since 1891, to form Royal Dutch Shell.

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Royal Dutch Shell dominated colonial oil exploration for more than thirty years. By 1911 Royal Dutch Shell operated concessions in Sumatra, Java, and Kalimantan (then called Borneo), and Indonesian oil was almost 4 percent of total world production. Indonesia’s most important oil fields, the Duri and Minas fields in the central Sumatran basin, were discovered just prior to World War II by Caltex, a joint venture between the American companies Chevron and Texaco, although production did not begin until the 1950s. By 1963 the Duri and Minas oil fields, located in Riau Province near the town of Dumai, accounted for 50 percent of oil production.

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The post independence government increased its control over the oil sector during the 1950s and 1960s by increasing operations of several government-owned oil companies and by stiffening the terms of contracts with foreign oil firms. In 1968 the government companies; Indonesian Oil Mining company (Pertamin), National Oil Mining Company (Permina), and the National Oil and Gas Company (Permigan) were consolidated into a single operation, the National Oil and Natural Gas Mining Company (Pertamina).

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At this time, a new form of contract; the production-sharing contract, was introduced. A production-sharing contract split total oil production between the contractor and the government, represented by Pertamina, and allowed the government to assume ownership of structures and equipment used for exploration and production within Indonesia. Indonesia’s contract terms were considered among the toughest in the world, with the government in most cases receiving 85 percent of oil produced once the foreign company recovered costs.

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Annual oil production in Indonesia peaked in 1977 at over 600 million barrels. The official price of Minas crude was then about US$14 per barrel, a substantial rise from the 1973 price of about US$4 per barrel as a result of OPEC’s successful market manipulations. Prices continued to soar in 1981, reaching US$35 per barrel, and oil exports peaked at US$15 billion, or about 70 percent of total export earnings.

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In 1982, however, production declined, reaching a low of 460 million barrels and the oil market began to weaken that same year, when Indonesia’s Minas crude was priced at US$29. The market collapsed in 1986, bringing the Minas price to below US$10 per barrel. Recovery of oil prices began slowly and by 1989 Minas was priced at about US$18 per barrel. Total production in 1989 was almost 500 million barrels, and oil exports were valued at US$6 billion.

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Indonesia had proven oil reserves in 1990 equal to 5.14 billion barrels, with probable reserves of an additional 5.79 billion barrels. Throughout the archipelago there were sixty known basins with oil potential; only thirty-six basins had been explored and only fourteen were producing. The majority of unexplored areas were more than 200 meters beneath the surface of the sea. Indonesia’s oil reserves were usually found in medium and small-sized fields, so that continued exploration was vital to maintain production and known reserves.

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In 1989 and 1990, the government loosened some provisions for new contracts to stimulate exploration, particularly in frontier areas. Improved oil market conditions in the late 1980s also contributed to a surge in production-sharing contracts. Fifty-seven of the 100 contracts active in 1992 were signed from 1987 to 1991. The newer contracts committed US$2.8 billion in exploration during the 1990s. Production from existing oil fields was still dominated by Caltex’s operations in Sumatra, which accounted for 47 percent of Indonesian oil production in 1990. Twenty foreign oil companies, primarily United States-based, were active producers in 1990.

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Pertamina operated eight petroleum refineries with a total capacity to produce 400,000 barrels per day of a variety of distilled products for domestic use and export. The Indonesian government subsidized the domestic prices of distillates, and in spite of several price increases during the 1980s, prices in Indonesia were well below international market prices by 1990. For example, kerosene, used primarily for cooking, was priced at Rp190 per liter following a 15 percent price hike in May 1990; the price of kerosene in Singapore was then equivalent to Rp643 per liter and in the Philippines, Rp512 per liter. The total cost of fuel subsidies amounted to Rp2.6 trillion (US$1.3 billion) in FY 1990.

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Pertamina forecast an increase in domestic demand for distilled products of 7 percent per year, and hoped to meet this demand and, simultaneously, to expand exports. Four new refineries with a total capacity of 500,000 barrels per day intended entirely for export were in various stages of planning in 1990.

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Now let go back to the question above. Why the OIL production in Indonesia is faltering over time? There are several things:

1st issue: PERTAMINA on behalf of the Indonesian Government has very tough, probably the toughest term agreement in the world that is too bureaucratic and detrimental for the continuation of oil exploration in Indonesia that is vital to maintain oil production. Knowing the production and exploration are faltering over time, failure to response this trend does lie on the shoulder of those big bosses who run PERTAMINA.

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2nd issue: As a result of having such a tough term agreement, the OIL production cost of recovery in Indonesia is around $9 per barrel. In 2007, to get about $13 billion dollar OIL revenue, Indonesia had to pay cost of recovery for about $15 billion. That cost of recovery is unacceptable compared to other countries around the world. To understand this cost of recovery, one needs to understand and pay close attention at PERTAMINA’s miscellaneous expenses.

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3rd issue: Now let compare that price with other countries. Malaysia being a country that has similar challenge on oil exploration and demography, the cost of recovery in Malaysia was only $3.50 per barrel. That is $5.5 dollar per barrel different. Now multiply that amount with 1.4 million BARREL per day, per week, per month and per year for so many years, how much money Indonesia has been robbed by the so called: “Cost of Recovery”? Go figure!

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That is close to over $2.5 billion dollar a year, the natural resources belong to the Indonesian people were being robbed. If Malaysia was able to pay $3.50 per barrel, why do we have to pay $9.00 per barrel? Why? Are we being robbed by Foreign Contractors with much assistance of our own people?

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4th issue: With the faltering economy and inability to think outside the box to find a better solution to fulfill the domestic energy consumption, making Indonesian people continue to suffer, unable to increase OIL production and unable to export OIL. The failure for PERTAMINA to address this issue is a tragic. It is a tragic not only for PERTAMINA itself but also for millions and millions Indonesian people who expect the country’s natural resources to be used to improve their lives. What option does PERTAMINA ever come up to remedy this issue? I have not seen one that is significant enough to resolve the issue.

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If there is any country in the world that deserves to have and to think of having a NUCLEAR power to generate energy is INDONESIA. With the faltering OIL production, why don’t we?

5th issue: In the absence of transparency in the accounting system and too many secret deals and secrecy undertaken in the PARTAMINA operations make it much more difficult to oversee the progress. As a result, the debacles can only be discovered when participant (s) in those secret deals are caught on bribing charges of corruption. This is where DPR shall play a critical role to scrutinize and oversee PERTAMINA operations.

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So, the faltering oil production in Indonesia was not caused by the lack or the absence of basins with oil potential, but it is because of the term contract, mismanagement; the people behind the desk, bureaucracy, ignorance, self-centeredness, corruption and inability to think outside the box.

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Have you ever wondered why those Bosses in Pertamina so rich? Where did they get the money from?

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Remember with the first Head of Partamina; Mr. Ibnu Sutowo? What did happen to him?

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“Korupsi di sektor energi dan perminyakan (PERTAMINA) belum terbasmi. Ini mengingatkan kita pada kisah empat dekade silam. Ibnu Sutowo, yang kala itu memimpin Pertamina, diberitakan telah merugikan negara US$ 1,6 juta (kurs saat itu Rp 400 per dolar Amerika). Ibnu dituding telah berkongkalikong dengan pihak Jepang. Kekayaannya pun menggembung hingga puluhan miliar rupiah.

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Komisi Empat, yang dibentuk pemerintah Soeharto untuk menyelidiki kasus ini, berhasil menemukan penyelewengan. Tapi, anehnya, tak ada tindakan hukum apa pun terhadap pelaku korupsi. Baru pada 1976, ketika Pertamina jatuh akibat krisis, Ibnu Sutowo diberhentikan sebagai Direktur Utama Pertamina dengan meninggalkan utang raksasa US$ 10,5 miliar, yang nyaris membuat perusahaan minyak ini bangkrut.

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Now what happens today?

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Lihat kasus suap ke para pejabat teras Kementrian Energi dan PERTAMINA yang terbongkar di pengadilan Tata Usaha di Inggris sebagaimana yang tertulis di link di bawah ini.

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http://epaper.korantempo.com/KT/KT/2010/03/30/ArticleHtmls/30_03_2010_003_001.shtml?Mode=1

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Being an employee of government owned company (BUMN) does not make million dollars a year unless that person is CEO of the Company. But even then, how many CEO’s does PERTAMINA have? Why then majority of those upper managements who work for PERTAMINA is so rich? Where did they get the money from?

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This is where briberies, corruption and kick backs shall be investigated vigorously. Where do they get the money from?

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http://www.rakyatmerdeka.co.id/news/2010/01/09/86101/Walau-Gonta-ganti-Direksi,-Pertamina-Tetap-Bobrok

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PERTAMINA: “Mata duitan, korupsi dan inkompetensi”

*UPDATE - March 29th, 2010

http://epaper.korantempo.com/KT/KT/2010/03/30/ArticleHtmls/30_03_2010_003_001.shtml?Mode=1

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Source: http://epaper.korantempo.com (3/3/2010)

Kasus suap ke para pejabat teras Kementerian Energi dan Pertamina yang terbongkar di pengadilan tata usaha Inggris baru-baru ini sungguh memalukan. Pemerintah dan Komisi Pemberantasan Korupsi harus segera mengusut skandal ini. Tanpa tindakan tegas, citra Indonesia bakal kian terpuruk.

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Skandal itu menunjukkan korupsi di sektor energi dan perminyakan belum terbasmi. Ini mengingatkan kita pada kisah empat dekade silam. Ibnu Sutowo, yang kala itu memimpin Pertamina, diberitakan telah merugikan negara US$ 1,6 juta (kurs saat itu Rp 400 per dolar Amerika). Ibnu dituding telah berkongkalikong dengan pihak Jepang. Kekayaannya pun menggembung hingga puluhan miliar rupiah.

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Komisi Empat, yang dibentuk pemerintah Soeharto untuk menyelidiki kasus ini, berhasil menemukan penyelewengan. Tapi, anehnya, tak ada tindakan hukum apa pun terhadap pelaku korupsi. Baru pada 1976, ketika Pertamina jatuh akibat krisis, Ibnu Sutowo diberhentikan sebagai Direktur Utama Pertamina dengan meninggalkan utang raksasa US$ 10,5 miliar, yang nyaris membuat perusahaan minyak ini bangkrut.

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Praktek serupa kini kembali menggerogoti Pertamina. Pengadilan tata usaha Inggris, Southwark Crown, pada 18 Maret lalu memutuskan Innospec Ltd terbukti bersalah telah menyuap pejabat Kementerian Energi dan Pertamina guna mempertahankan posisinya sebagai pemasok timbel untuk produksi bahan bakar di Indonesia. Produsen timbel asal Inggris ini pun dijatuhi sanksi denda US$ 12,1 juta atau sekitar Rp 109 miliar.

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Menurut hakim Justice Thomas, dana “haram“itu antara lain mengalir ke Rachmat Sudibyo, yang saat itu Direktur Jenderal Minyak dan Gas Bumi. Ia diindikasikan menerima suap US$ 1 juta lebih dari Innospec melalui agennya di Indonesia, PT Soegih Interjaya. Ini hanya sebagian kecil. Soalnya, berdasarkan temuan Badan Antikorupsi Inggris (Serious Fraud Office), dana yang telah digelontorkan Innospec ke para pejabat Indonesia selama 1999-2006 mencapai US$ 17 juta.

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Sejumlah petinggi Pertamina juga menerima jatah. Suroso Atmo Martoyo, yang ketika itu Direktur Pengolahan Pertamina, termasuk yang disebut-sebut telah menerima fee transaksi US$ 300 ribu dari Innospec.

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Auditor pun melaporkan bahwa Suroso dan Mustiko Saleh, saat itu Wakil Direktur Utama Pertamina, pernah mendapat fasilitas perjalanan ke Inggris bersama keluarga mereka.

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Peluang korupsi tersebut muncul setelah pemerintah dan Dewan Perwakilan Rakyat saat itu sepakat menunda pemberlakuan program bensin tanpa timbel, yang semula ditargetkan berlaku pada 2003. Mepetnya anggaran negara untuk subsidi bahan bakar minyak menjadi alasannya. Kebijakan ini dimanfaatkan betul oleh Innospec. Untuk mengamankan posisinya dari ancaman produsen timbel asal Cina dan Amerika, perusahaan ini lantas mengucurkan pelicin ke para petinggi Pertamina dan Kementerian Energi.

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Kita tak boleh mengabaikan temuan dari Inggris itu. Pemerintah jangan ragu membongkar borok di Pertamina dan Kementerian Energi sekaligus mendorong KPK segera mengusut tuntas kasus ini. Langkah cepat diperlukan agar citra Indonesia, yang kini termasuk dalam 16 negara terkorup di Asia-Pasifik, tidak semakin terpuruk.

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http://epaper.korantempo.com/KT/KT/2010/03/30/ArticleHtmls/30_03_2010_004_002.shtml?Mode=1

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