Jakarta — Publish What You Pay (PWYP) Indonesia — a coalition of civil society organizations advocating for transparency and accountability in the governance of energy and natural resources (SDA) — emphasizes that the ongoing investigation of the alleged corruption in the governance of crude oil and refinery products at PT Pertamina, currently handled by the Attorney General’s Office (AGO), highlights the lack of governance Indonesia’s oil and gas (migas) sector over the past decade.
PWYP Indonesia’s National Coordinator, Aryanto Nugroho, stated that the revelation of this case must serve as a crucial moment to reform the governance of the oil and gas sector across its entire supply chain, including its trading aspects.
On the one hand, the AGO must pursue other actors involved in this systematic and structured corruption. “Many more parties should be involved, considering the alleged corruption that almost spans the entire supply chain from 2018-2023. This includes the alleged manipulation of the Downstream Optimization Meeting (OH) to decrease refinery readiness/production, resulting in insufficient domestic oil production and, ultimately, reliance on imports for crude oil and refinery products; procurement of crude oil and refinery product imports; alleged markups in shipping contracts; and allegations of blending lower-grade Ron 90 or below at storage depots to pass them off as Ron 92.”
PWYP Indonesia urges the AGO to ensure that the flow of funds from alleged markups and potential kickbacks is thoroughly traced. “We cannot let this enormous corruption scandal remain opaque, with no clear trace of where the money has gone,” said Aryanto.
On the other hand, the Government must take systematic and integral steps to improve oil and gas governance, including its trading mechanisms. “If this is not done, the situation will simply allow one oil and gas mafia to be replaced by another. The system itself will not have been fixed,” he added.
Old Modus Operandi, No Reforms
Referring to the recommendations from the Oil and Gas Governance Reform Team (TRTKM), led by the late Faisal Basri a decade ago, some of these key suggestions were:
- Stop importing RON 88 and 0.35% sulfur gasoil, replacing them with Mogas92 and 0.25% sulfur gasoil.
- Reorganizing the entire process and authority over crude oil sales and procurement, including disbanding Petral and conducting a forensic audit.
- Setting retail fuel prices based on a fixed and stable formula, including the “alpha” determination formula, that is transparent to the public.
- Revamping old refineries and building new ones.
This means the alleged corruption in the governance of crude oil and refinery products at PT Pertamina is not a new modus operandi. The situation could have been prevented if the TRTKM recommendations had been implemented.
Instead, rather than removing Ron 88, the Government introduced Ron 90. There were no news has surfaced regarding the forensic audit of Petral. Revamping and building new refineries have faced continuous obstacles.
Oil imports have risen over the past decade. The burden of fuel subsidies and compensation on the state budget has increased. The addition of tanker ships for crude oil and refinery product transportation has been delayed.
“We suspect there has been an effort to maintain a situation where Indonesia must continue importing oil, blending, and abusing fuel subsidies for years. The Oil and Gas Mafia and Rent Seekers reap the benefits in this environment,” explained Aryanto.
Strengthening Transparency and Accountability
Aryanto urges the Government, specifically the Ministry of Energy and Mineral Resources (ESDM), the Ministry of SOEs, and PT Pertamina Holding, to improve transparency and accountability. “It may sound cliché, but this must be done immediately!”
For example, Indonesia’s performance in the Extractive Industries Transparency Initiative (EITI) 2024 validation report resulted in a score of 67 out of 100, which is categorized as relatively low.
The validation has three components: transparency, stakeholder engagement, outcomes, and impact. Transparency received the lowest score, just 63.5 out of 100, significantly lowering Indonesia’s overall score.
Moreover, the 2018 EITI report on oil and gas commodity trade transparency shows that data from 80% of commodity transactions in the country was not included despite revealing a large amount of information. In other words, much-undisclosed data from the Government and Pertamina regarding oil exports and imports remains.
“Additionally, public participation in oversight must be strengthened, and asymmetry of information must be prevented to ensure effective public control,” he urged.
Information Asymmetry in the Alleged Corruption Case of Crude Oil and Refinery Products Governance at PT Pertamina
Currently, the public is confused by the debate surrounding the terms “blending” and “cutting”; the differing opinions between the AGO and Pertamina, including the XII Commission of the DPR regarding the “blending” of imported refinery products, from Ron 90 (equivalent to Pertalite) to Ron 92 (equivalent to Pertamax); and the tremendous state losses, which amount to Rp 193.7 trillion, potentially increasing as only the 2023 figures have been calculated.
To avoid further confusion, the Government, Pertamina, and relevant authorities (without interfering with the independence of law enforcement) must clearly explain the processes involved in the procurement of crude oil and refinery products, the blending mechanisms, shipping, distribution, and the use of fuel subsidies, in a way that is transparent and easy for the public to understand.
“This is an important first step toward implementing systemic and integral governance reform.”
On one hand, the AGO must continue to thoroughly investigate the case transparently and professionally. But it must also ensure that the public receives a comprehensive understanding of the situation, given the many technical terms that are hard for the public to grasp and the massive state losses that must be properly accounted for.
Contact: Aryanto Nugroho – aryanto@pwypindonesia.org