Revolution in Indonesia’s Oil Industry (2) *

The situation has already been changed, since the emergence of Law number 22 of 2001, Domestic oil industry has not being monopolized by Pertamina. Now Peratmina is just as own state company, which is operated in oil industry. The regulation function in oil industry has given back to the government, where here is represented by Ministry of Energy and Mineral Resources. Other essence of this law is the opportunity of other player either domestic or foreign to involve in oil industry in both upstream and downstream market. It means that this law promotes competition in domestic oil market. Besides that, this law also states the establishment of Badan Pelaksana Hulu Migas (BP Migas) and Badan Pengatur Hilir Migas (BPH Migas). BP Migas has authority to make oil and gas exploration contract and has being tasked to supervise the implementation of the contract. BPH Migas has responsibility in downstream market regarding to managing the distribution of the fuel and ensuring the availability of the fuel in any region of Indonesia.
To days, we can see the effect of competition in domestic oil industry. Particularly in fuel retail industry, now there are several foreign companies that involve in. As an effect, many SPBU, which previously did not consider about the service, become compete each other to satisfy the consumer. Now, we can see that all SPBU very considers about the quality of oil and measuring instrument. They are also giving additional facilities to increase the loyalty of customers. In many SPBU, we can find healthy and clean toilet, more representative praying place, various way of payment to buy a fuel, even cozy café and mini market is there. Moreover, they very considers about promoting its product. Some SPBU frequently sets new program to attract consumers. Finally, the customer will enjoy more benefits from these changes. It, of course, will increase the consumer welfare in general.
Considering about the changes, Pertamina has also made an improvement. The company set a program that known as Pertamina Way to response the rise of competition in oil industry. The program is focused on giving satisfaction services to the customer. The concept of Pertamina Way includes; (1) motivated and trained staff, (2) quality and quantity guaranteeing, (3) product knowledge, (4) standardized SPBU and (5) maintained equipment including fuel measurement instrument. Besides that, the improvement has also being done in upstream part. Now Pertamina does not only focus on domestic exploration. The company expands its market by involved in exploration tender bidding in several countries such as Brunei Darussalam and South Africa. It shows that Pertamina is on the way to be international oil company.
Regarding to the subsidy of fuel in Indonesia, it may be true that subsidy is still happen until now. Even the subsidy has going bigger due to the increasing of oil price, while Indonesia now is net importer of oil. Nevertheless, by omitting external factor, the subsidy paid by government now is lower than previous monopoly period. Today, not all kind of fuel being subsidize by government. The government only subsidizes the fuel that highly related with law or middle income people such as gasoline, law octane premium and diesel duel. This policy has reduced the burden of subsidy in budget and has given opportunity to other sector that also need subsidy to be more developed. Besides that, this policy makes Pertamina cannot rely much to subsidy to be survive in oil industry as happening under previous period. This policy also forces Pertamina to invent new non subsidized product that attract high class consumer to increase their profit.
Based on explanation above, we can conclude that the new regulation of oil industry is not only beneficial for consumer, but also encourage national oil company to be more efficient and innovative.
to be continued

*this article has been published at my previous blog. originally, I wrote it at July 9th 2008

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