T

he disbandment of the government'€™s troubled oil trading company Pertamina Energy Trading Limited (Petral) will be ineffective in eliminating the so-called oil mafia if no overhauls are made in the procurement of crude oil and related products, a House of Representatives member has said.

Kardaya Warnika, head of House Commission VII overseeing the energy sector, said improvements in terms of efficiency and transparency in oil supply procurement were key issues left unaddressed by the dissolution of Petral.

'€œIf Petral is dissolved but the procurement is conducted in a similar way and provides no efficiencies that can be translated into inexpensive fuel prices for society, it will be pointless,'€ Kardaya said.

Kardaya was asked to comment following a recent announcement from state-owned oil and gas giant PT Pertamina that it is considering permanently dissolving its subsidiary.

The role of Petral has become an on-and-off subject of debate in the energy sector in recent years as the company, which handles oil imports from Singapore, was seen as being beneficial to oil brokers.

Petral, which began operations in 1976, again came into the public spotlight late last year after a reform team for oil and gas governance led by noted economist Faisal Basri recommended reducing its role, suggesting that Pertamina change the way it imported oil from abroad.

State-Owned Enterprises Minister Rini Soemarno implied on Friday during a hearing at the House that the government would soon liquidate Petral.

The turn of events is slightly different to the company'€™s stance up until late last year that it would restructure Petral'€™s role instead of dissolving the subsidiary.

The dissolution plan has also raised question as Petral has become a paper-based administrative firm while all activities are actually performed under its Singapore-based subsidiary called Pertamina Energy Services (PES), which will likely be maintained although the parent firm may be dissolved. The role of the latter has also been overhauled as Pertamina has decided to shift the procurement of crude oil and other petroleum products to a unit called the Integrated Supply Chain (ISC).

Pertamina'€™s ISC has started to work on seeking supplies for Pertamina for July onward. Prior to the overhaul of Petral and PES'€™ roles, contracts for crude oil and petroleum products had been signed for the January to June period.

Under its plan, the ISC is aiming to report efficiencies in crude oil and petroleum product procurement of around US$122 million by the end of this year.

The ISC was initially established in 2008 following alleged graft connected with the procurement of Zatapi crude oil. The unit, established when Pertamina was led by Ari Soemarno, was tasked with controlling Petral.

'€œIf it is now disbanded, we will see a turnaround to previous practices where Pertamina handled procurement in Jakarta. However, in the past, tenders performed here were targeted by many political players,'€ warned Chrisna Damayanto, a former processing director of Pertamina who was also procurement unit head before the role was given to Petral. He declined to elaborate further on the type of intervention that occurred in the past.

Pertamina president director Dwi Seotjipto, who took office in November last year, said his company would make a thorough assessment so that it could make use of Petral'€™s assets '€” namely PES '€” and free them of bad practices.

'€œThis is not changing clothes. We are talking about how to seek optimum benefit for the company. We are restructuring the business by eliminating ineffective business processes,'€ Dwi said.

Energy and Mineral Resources Minister Sudirman Said said earlier that the government supported Pertamina'€™s decision to end Petral'€™s operations, but left the choice up to Pertamina.

'€œWhether it closes down or not is a corporate decision. Our concern as the regulator is more about how we can secure fuel supplies,'€ he said.