Give Karen the Freedom to Bring About Change

The Jakarta Globe, Supramu Santosa, February 21, 2009 

Once again, Pertamina finds itself with a new captain at the helm, Karen Agustiawan, after three years commanded by Arie Sumarno, and short stints by Widia Purnama (two years), Afifi (one year), and Baihaki Hakim (three years). 

The fact that Pertamina is subject to so many leadership changes does nothing to benefit its growth and development. If meaningful change is to be brought about at Pertamina, management continuity is essential. A new leader of Pertamina who wishes to institute fundamental, comprehensive changes in the company — something Pertamina urgently needs if it is ever to become a world-class company — will need four or five years to develop and implement the necessary strategies. 

Pertamina has everything a corporation needs to become a world-class outfit. It has upstream, exploration and production assets with an amazing amount of potential. Its exploration areas are vast and, potentially, extremely lucrative and of huge interest to major international oil and gas companies. Pertamina’s exploration and production areas can be further optimized and maximized due to their current low recovery rates. By deploying state-of-the-art oil and gas technology, production from Pertamina’s fields can be significantly raised. By increasing exploration and optimizing exploitation, these upstream activities could become the cornerstone of incredible value creation for Pertamina. 

Pertamina also has huge downstream assets, including oil refineries and a vast distribution network throughout Indonesia of the sort that newcomers to the country’s downstream oil business, like Shell and Petronas, can only dream about. How much would it cost Shell, Petronas, or Exxon to establish distribution networks of the same extent as Pertamina’s? Although the oil and gas law has opened the door to competition in the downstream arena, Pertamina is light years ahead of its competitors. 

In terms of Pertamina’s human resource capabilities, it has competent and experts in many fields. While there is skepticism about the company’s human resources, this writer can vouchsafe, based on long interaction with Pertamina, that the company has a host of innovative and professional staff. What the company needs is to create a working environment and a culture that can motivate its staff to work professionally and to the best of their abilities. 

Under professional management, Pertamina should be able to develop into a well-respected, world-class oil and gas enterprise, as long as government gives the company the opportunities it needs to grow. Give Pertamina the chance to invest further in the upstream and downstream sectors. With its huge assets and major financing potential, growing Pertamina should not be difficult, whether based on cooperation with strategic industry partners, or through other sources of financing. 

However, in order for Pertamina to grow, political will on the part of all sides will be needed. Pertamina’s management needs to be given more space to implement its policies and decisions, just like any other oil and gas enterprise in the world, free of interference from the politicians. Place Pertamina under the supervision of a professional board of commissioners, the Development Finance Comptroller, or BPKP, and independent auditors, instead of the House of Representatives, or DPR, and the cabinet. To date, the head of Pertamina has had to spend too much time preparing for and attending meetings with the House and government. There is too much political interference in Pertamina’s policies, even as regards the nitty-gritty, such as the procurement of goods and services. 

While it is true that Pertamina has a duty to supply and distribute oil-based fuels at government-set, subsidized prices, the question of pricing and the size of subsidies, which are political decisions, should not be allowed to disrupt the company’s finances. Pertamina still needs to be allowed to earn a profit on these endeavors. Pertamina’s profit is also state profit, as the government is Pertamina’s sole shareholder. Unfortunately, the supply and pricing of subsidized fuels are highly sensitive areas, and it often seems that Pertamina’s performance is judged based solely on these issues. That’s why Pertamina needs to improve the management and monitoring of subsidized fuel supplies. Smooth distribution, free of the disruptions that are currently all too frequent, will diminish criticism of Pertamina, and allow management to concentrate on growing the company. 

We need to give Pertamina the freedom to act, just like other oil and gas enterprises. So, give Pertamina’s new president director, Karen Agustiawan, the time and the freedom she needs to realize her vision, accompanied, of course, by tight supervision by a professional board of commissioners. 

Supramu Santosa is CEO of oil and gas company Star Energy.

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