Preventive measure: Erick speaks at an event in Jakarta. The SOE Minister says he will discuss the restructuring options for Pertamina subsidiaries with Bahlil and the Upstream Oil and Gas Regulatory Task Force. — AFP
JAKARTA: The government is considering merging two subsidiaries of state-owned oil and gas holding company Pertamina after a corruption scandal over billing and selling lower-grade imported fuel as more expensive high-octane fuel, which caused an estimated US$11bil in state losses.
State-owned enterprises (SOEs) Minister Erick Thohir vowed last Saturday to institute reforms as a preventive measure for similar fraudulent practices, including possibly merging PT Pertamina Patra Niaga and PT Kilang Pertamina Internasional (KPI), two subsidiaries allegedly implicated in the ongoing graft case.
“Regarding Pertamina, we will do a thorough review to look at what we can fix,” Erick said on Saturday, as quoted by Kompas.com.
“We will do a review of our subholding companies and the possibility of merging two firms,” he added, indicating these were part of the improvement measures.
The Attorney General’s Office (AGO) is investigating executives at Pertamina’s fuel trading, shipping and refining units, including Patra Niaga, KPI and PT Pertamina International Shipping.
The Assistant AGO for Extraordinary Crimes has named two president directors and four senior executives of Pertamina subsidiaries as suspects in the case, as well as three individuals from private oil and gas shipping companies.
According to the AGO, the nine suspects allegedly colluded to manipulate import and export deals for Pertamina between 2018 and 2023, violating an Energy and Mineral Resources Ministry regulation that requires the state-owned oil and gas giant to prioritise domestic crude oil before considering imports.
The scheme allegedly began by deliberately reducing production at Pertamina refineries to artificially induce underutilisation of domestic oil, which prompted the company to import crude and refined petroleum products to meet domestic demand.
The executives are also suspected of colluding to fix import prices prior to official Pertamina tenders for the purpose of illicit enrichment.
AGO investigators also discovered that lower-grade fuel with a research octane number of less than 90 was sold as the more expensive RON 92 fuel under the local brand Pertamax.
Shipping bills for fuel imports were also allegedly inflated between 13% and 15%.
Erick noted at Saturday’s press conference that mergers had been used in the past as a solution after a crisis.
For example, restructuring followed cases involving state-owned insurers PT Asabri and PT Jiwasraya as well as state-owned airline Garuda Indonesia.
In the case of Asabri, which cost the state over 22 trillion rupiah in losses, the old age and accident insurance company was restructured, with talks of a potential merger into state-owned insurance, guarantee and investment holding company Indonesia Financial Group.
As for the Jiwasraya case, which cost the state more than 16 trillion rupiah, the life insurer’s customers were transferred to IFG.
Erick said he would discuss the restructuring options for Pertamina subsidiaries with Energy Minister Bahlil Lahadalia and the Upstream Oil and Gas Regulatory Task Force.
He added that no decision had been made on replacing Patra Niaga’s president director, but that the matter would be discussed with the company’s chief commissioner. — The Jakarta Post/ANN
