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The Jakarta Post: Shell wants clarity on govt rules for sale of subsidized fuels

Ika Krismantari, The Jakarta Post, Jakarta
Saturday 16 June 2007

The local arm of Royal Dutch Shell Plc., PT Shell Indonesia, said Friday that it would require clarification of the government’s rules on the sale of subsidized fuels before it would get involved in the sector.

“We welcome the government’s plan to encourage new players in the subsidized fuel distribution business, and if the regulations turn out to be appropriate and provide a level playing field, we will be interested,” the newly-appointed president director of Shell Indonesia, Darwin Silalahi, told reporters Friday on the sidelines of the launching of the company’s corporate social responsibility program, Shell LiveWIRE.

Downstream Oil and Gas Regulatory Agency (BPH Migas) head Tubagus Haryono said recently that his agency was studying the possibility of relaxing the existing regulations so as to allow private sector firms to sell subsidized gasoline, which accounts for about 95 percent of the country’s fuel sales.

Without changes to the regulations, it will be difficult for the new players to become involved in the distribution of subsidized fuels.

However, many in the industry doubt that the government is really serious about relaxing the regulations.

The government removed Pertamina’s monopoly over the sale of oil-based fuels in 2005, but the state-owned oil and gas firm retains control over the subsidized-fuel market as, according to the government, the new entrants are unable to satisfy the set requirements. As a result, they are currently only allowed to sell non-subsidized high octane fuels.

Subsidized fuels include Premium gasoline, kerosene and diesel used by motorists, households and small businesses.

Besides waiting for clarification over the government’s plans for the sale of subsidized fuels, Darwin said that Shell would also need to investigate further its economic feasibility, even though he acknowledged,”it would be a great opportunity for us to carve out a market beyond what we already have.”

Shell currently sells non-subsidized fuels under the trade names Shell Super and Shell Super Extra, and high-quality Shell Diesel, in 10 Shell gas stations in Greater Jakarta.

Shell was the first foreign company to enter Indonesia’s retail gasoline business. Following Shell’s arrival, Malaysian state oil and gas firm Petroliam Nasional Bhd. (Petronas) has also set up shop here and currently operates two gas stations. It plans to open 21 more this year in Jakarta.

A number of global oil giants, including U.S.-based oil company Chevron, and France’s oil giant, Total, are in the process of securing licenses from the government. Shell is also set to expand its business by establishing gas stations outside Java.

http://www.thejakartapost.com/detailbusiness.asp?fileid=20070616.L02&irec=1

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