Petral faces investigation over alleged illicit practices

State-Owned Enterprises Minister Dahlan Iskan says he will support the disbandment of Pertamina Energy Trading Limited (Petral), state oil and gas firm PT Pertamina’s trading arm, should the company be found to have conducted illicit practices.

To prove whether illicit practices took place in Petral, Dahlan said he could request state power company PT PLN’s tender team to audit Petral’s tender system. He said that PLN had been successful in reforming its tender system into a clean and reliable system over the past two years.

“Or we can request an independent body audit Petral so that we have objective judgments on what actually happens in the company,” he argued.

The establishment of Petral was actually a correction to Pertamina’s trading system in the past, he explained. Prior to Petral, the job of trading and importing crude oil and oil fuels was conducted by two divisions in the company, but these divisions were plagued by rampant corruption and intervention by people who sought illegal profits.

“If we decide to end Petral’s operations, we have to think of a new method of trading in Pertamina. But, I don’t want the old system [in which trading was handled by divisions in Pertamina] to be reactivated,” Dahlan told reporters at a press conference at his office in Jakarta on Thursday.

“Even Pertamina president director [Karen Agustiawan] agreed that Petral should be disbanded if it merely tarnishes Pertamina’s image.”

Responding to the disbandment discourse, Pertamina spokesperson Mochammad Harun said tenders in Petral were very transparent and conducted via an online system. The company is also annually audited by the Supreme Audit Agency (BPK) and public accountants, he added.

“Petral helps Pertamina fulfill crude and other oil-based products needs. In 2011, Petral traded 266.42 million barrels comprising 65.74 million barrels of crude and 200.68 million barrels of other products. The company recorded US$47.5 million in profits, up 10 percent from 2010,” he told The Jakarta Post.

The Perta Group (Petral’s previous name) was founded in 1969 as a joint venture between Pertamina and the US interest group. A study led by consulting company McKinsey said Petral provided crucial market intelligence for Pertamina. The second reason is that since it is based in Singapore, the region’s central financial service hub, it provides easier access to funding for procurement. The last reason is that a subsidiary gives it greater flexibility to operate.

Petral is based in Singapore. Its markets are mostly in the Asia Pacific region as well as the US, Europe, Middle East and Africa.

Last week, several politicians, including Ali Mochtar Nagabalin, Adhie Massardie, Marwan Batubara and Johnson Panjaitan reported indications of corruption in Petral to the Corruption Eradication Commission (KPK).

In a press statement, Petral president director Nawazir said the procurement of crude and oil products for Pertamina was always conducted through open tenders. Around 55 companies usually joined a tender, he reported.

“The companies must fulfill all criteria of selected business partners [DMUT],” he said.

He said that direct appointment was considered only for the procurement of rare or limited products.