RECENT ENERGY NEWS

DECEMBER 18, 2000:  
IMI: Pertamina Begins Internal Restructuring

Pertamina President Baihaki Hakim announced on December 11 that the Indonesian government had issued Presidential Decree 169/2000 that authorizes the restructuring of the state-owned petroleum company.  Pertamina had examined the organizational structure of major international oil producers to develop its new structure with an eye to becoming a world-class contender itself.  Its restructuring is the first step in a process that will see Pertamina move from state-owned enterprise to limited liability company two years after the oil and gas bill is enacted, then eventually to privatized status.  Baihaki told the press that privatization could take place as early as 2003.  The oil and gas bill is now before Parliament.

Among other changes, the decree will simplify Pertamina’s organizational structure.  Currently, there are five directorates and one semi-independent body:

• exploration and production;

• processing;

• supply and marketing;

• shipping, harbors, and communication;

• general affairs;

• financial affairs; and

• the foreign contractors management body (BPPKA).

After restructuring, Pertamina will have five major elements:

• upstream sector (formerly the exploration and production directorate);

• downstream sector (merging processing; shipping, harbors, and communication; and supply and marketing);

• development (responsible for human resources management, information technology, strategic planning, environmental issues, and business development);

• financial affairs; and

• oil and gas contractors.

If the oil and gas bill is enacted and an independent Implementation Agency is established to supervise production sharing contracts (PSC’s), then the new oil and gas contractors’ directorate will be dissolved.

A second presidential decree will name the directors of the newly formulated offices.  Baihaki said that he hoped the additional decree would be signed in January.  The press also reported that Pertamina would reduce its staffing by as much as 30-40 percent over a five-year period beginning in 2001.  The objective would be to reduce to a staffing level of 18,000 employees from the current 26,000.  The goal would be reached largely through attrition and early retirement, according to Baihaki.

Comment: The issuance of Presidential Decree 169/2000 indicates that Pertamina is serious in its support for the current oil and gas bill’s passage.  An earlier version of the bill failed to emerge from Parliament, due partly to stiff resistance from Pertamina.  A new oil and gas law will be an important step in rationalizing Indonesia’s energy sector and further opening the petroleum industry to foreign investment.

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