T

he recently established reform team for the oil and gas sector kicked off an official meeting on Wednesday with state-owned oil and gas giant PT Pertamina and its subsidiary, Pertamina Energy Trading Ltd. (Petral), to look into the firms and try to figure out any potentially illicit activities causing state losses.

The team'€™s head, outspoken economist Faisal Basri, said several issues were brought up during the meeting, including the process of crude-oil procurement at Petral.

'€œIt revealed that procurement of crude oil is dominated by national oil companies [NOCs]. It'€™s understandable that Petral cannot control how NOCs are supplying, whether its own products or also buying from traders. I'€™m asking for more details about this,'€ Faisal said.

Petral serves as Pertamina'€™s arm handling imports of crude oil and petroleum-based fuel for its parent firm. Due to its function, Petral has been accused of being an instrument of cartel-like operations in the sector and increasing the country'€™s dependency on overseas supplies.

The government has said that it would disband Petral should the company fail to be found transparent in its business and in acting for the benefit of the country. The reform team, established in November, is working on the issue and trying to build a system where no more loopholes exist for oil and gas mafia practices.

Faisal said the team also figured out that Petral has become a trading firm, which leases blending facilities in Singapore. Therefore, according to Faisal, the company also becomes a trader supplying clients other than Pertamina, including other NOCs and other countries.

'€œThere are missing links. We still have no conclusions and the team is still working,'€ Faisal said, adding that further meetings would be necessary.

Petral president director Bambang Irianto also attended the meeting. However, he declined to give details about the discussions.

'€œAll things have been delivered to the team,'€ he said, adding that any plan to dismiss Petral would be under the government'€™s authority.

Indonesia, a former member of the Organization of Petroleum Exporting Countries (OPEC), has seen increasing imports of oil and its products as domestic production can no longer meet the growing demand. Moreover, oil refineries in the country are no longer running at full capacity, increasing concerns on the country'€™s dependency on overseas energy supplies.

The country is currently importing crude at around 500,000 barrels per day, according to Faisal.

With growing demand, poor refinery facilities have pushed down the country'€™s energy security as they are only able to support consumption of 18 days, far below a capacity of 30 days recorded 10 years ago.

Agung Wicaksono, a member of the reform team, said refinery issues and fuel prices were also brought to the fore during the meeting.

'€œWe need to explore further that fuel prices from refineries in Indonesia, either produced by our oldest refinery in Plaju or by the newest facility in Kasim, Sorong [in Papua], are more expensive compared to imported fuel. We can recommend that it is better to import all of our fuel needs. However, the issue is not only about price but also our energy security,'€ Agung said.

He cited that the country'€™s fuel imports reached US$13 billion per year, which is equal to the investment needed to build a grassroots refinery with a capacity of 300,000 barrels per day.

Pertamina spokesman Ali Mundakir said the refineries produced more expensive products partly because they were designed to process sweet crude oil, the price of which is usually higher.

'€œAs many as 93 percent of costs in fuel production come from crude oil. We are currently working to upgrade our refineries so that they will be able to process sour crude, whose price is cheaper. If we can push down the raw material price, we can be more efficient [in costs],'€ Ali said.

There are currently six refineries operated by Pertamina in the country.