Business competition in the downstream oil and gas sector, particularly in the distribution of fuel oil, is increasingly difficult for foreign players, an industry player has said.
Chairman of the Investment Committee of the Association of Oil and Gas Companies (Aspermigas), Moshe Rizal, assessed that Pertamina’s dominance supported by the government makes it difficult for foreign competitors to survive in the Indonesian market.
“More than 90 percent of the fuel oil (BBM) market is controlled by (State energy company) Pertamina. This monopoly is facilitated and encouraged by the government, so foreign players find it difficult to compete,” Moshe said as quoted on Sunday, November 17, 2024.
This difficult situation can be seen from Shell Indonesia’s move to close nine gas stations in Medan, North Sumatra, throughout this year. Shell follows in the footsteps of other foreign companies, such as Petronas and Total Oil Indonesia, which have previously exited the gas station business in Indonesia.
According to Moshe, Pertamina has a significant advantage, especially as the only provider of subsidized BBM. “In addition, Pertamina’s fuel quality has also improved, giving them a stronger position in the market,” he added.
Shell Indonesia stated that the decision to close its gas stations in Medan was part of their global strategy to focus on low-carbon energy solutions and the lubricant business. In March 2024, Shell began construction of a Grease Manufacturing Plant in Marunda, Cilincing, North Jakarta, with a capacity of 12 kilotons per year.
A similar measure was also taken by Total Oil Indonesia, which closed all its gas stations in 2021. Previously, Petronas closed 19 gas stations in 2013 due to low sales.
However, the market left by foreign players has the potential to be taken over by Pertamina. “BBM distribution must remain even. If there is a shortage of distribution, Pertamina can fill this gap,” Moshe said.
Committee member of the Downstream Oil and Gas Regulatory Agency (BPH Migas), Saleh Abdurrahman, was of the opinion that the decision of foreign players to exit the gas station business in Indonesia is purely based on business calculations.
“The market is still competitive and open. Apart from Pertamina, several private companies are still active in this sector,” he said, as quoted by Kontan, on Sunday, November 17, 2024.
Although the competition in the downstream oil and gas sector is open, the government’s support for Pertamina remains a determining factor. With strong dominance, this state-owned company is expected to continue to dominate the fuel market in Indonesia.
