Corruption Undermines Pertamina A Scandal Of US$ 6.1 Billion

Decades of development is not enough to improve the efficiency of the oil and gas industry to a level that could be considered as adequate. The industry has even become a bone of contention of profiteers and white collar thieves. Corruption is rampant even until the fall of the corrupt regime of President Suharto's New Order. It would need a strong and determined government to uproot deep rooted corruption, collusion and nepotism (KKN) in the state-owned oil and gas company, that oversees development of the country's economic mainstay. There are at least 159 companies tainted with corruption, collusion and nepotism in Pertamina mainly involving companies controlled or partially controlled by the Suharto family and cronies.

KKN in Pertamina is mainly in the form of special facilities, untransparent tender of projects, including in the procurement of goods and government services, credit facility, tax facility, import duty and excises and favoritism, and various other irregularities, grafts and outright embezzlements.

Now despite strong waves of reform that seek to stamp out all forms of irregularities, corruption has apparently continued to undermine Pertamina. Apparently the thieves begin to see that time is getting short for them and they have to steal and stash away what they could before the real reformists knock on their doors the waves of reform roll over them. The Price Waterhouse Coopers (PWC), an independent auditor from Australia, hired by the government to audit Pertamina and PLN reported indications of "leakage" of US$6.1 billion between 1996 and 1998 in Pertamina. The report has been given to the Directorate General of Financial Institutions in the Finance Ministry. But as expected the management of Pertamina always has a good answer saying it is not yet final as it has not been officially handed over to the company.


The special audit report of the PWC indicates that Pertamina's head office has the largest share of US$ 2.4 billion of the leakage, the Foreign Contractors Management Body (BPPKA) got away with US$ 129 million, the Exploration and Production Directorate has the second largest share of US$ 2.1 billion, the Processing Directorate US$328 million, the Domestic Marketing and Provision Unit US$ 37 million and the Shipping, Communications and Port Directorate US$ 380 million. With the pension fund that has to be paid it comes to an exhorbitant amount of US$ 6.1 billion exceeding the amount pledged by the World Bank and other donors of the CGI for the country to cover the deficit in the state budget in the current fiscal year. The report said that some US$ 1.2 billion of the "leakage" were in foreign exchange loss. The PWC report contradicted Pertamina's official financial report as audited by the government financial watchdog BPKP which described the company as healthy saying that the company reported a high increase in profit from Rp295 billion to Rp2.7 trillion in 1998/1999.

Presidential decrees were at the root of all KKN in Pertamina. Most presidential decrees had provided a legal basis for KKN that as the present Mines and Energy Minister put it "the mines and energy ministry has run on a wrong foundation." The new government has said it would revoke the entire decrees and regulations. Pertamina would no longer hold the mining authority (KP). The authority would be returned to the government. The change, however, would make no much sense as there is no guarantee that the mines and energy ministry is better than Pertamina in preventing leaks.

Bambang Trihatmodjo has at least 29 companies having tie-ups with Pertamina

The former first family known as the Cendana Family and cronies are dominant in all businesses from upstream, midstream to downstream sectors of Pertamina. Bambang, a son of Suharto, alone has 29 companies involved in trading contracts for crude oil and refinery products, shipping/export contract for LPG and LNG, transport of crude oil with chartered ships, procurement of TEL (Tetra ethyl lead) additive, gas and naphtha trading and construction of LNG trains.

In oil and gas trading Bambang is Pertamina's partner in Permindo Oil Trading (POT). His younger brother Hutomo Mandala Putra (Tommy) is trading partner in Perta Oil Marketing, whereas Pertamina hardly needs pattern to export crude oil. Buyers come to Pertamina, therefore, it needs no a third party to act as a broker that would only add to the inefficiency of Pertamina. Partnership with the two companies was severed or not extended on July 1, 1998.


In oil trading, the two companies, reportedly, received fee of around 30 U.S. cents to 35 cents a barrel that Pertamina could have keep for itself. From the fee Bambang and Tommy earned at least Rp183 billion a month. Every day POT earned US$200,000 in profit from refinery product imports.

The profit earned by the two Cendana's companies did not include an estimated US$ 150,000 per day from the exports of 150,000 barrels of crude oil per day. Based on an exchange rate of Rp2,500 per dollar, POT received at least Rp875 million a day or Rp183 billion a month from crude trading.

In March 1999, Pertamina acquired the entire shares of PT Permindo Oil Trading Ltd and its name was changed with Pertamina International Trading. Previously POT was owned by Bambang (14.5%) Sudwikatmono (20.6%), Indra Rukmana (14.1%), Nirwan D Bakrie (10.3%), Syarief C. Sutardjo (7.6%), Mohamad Tachriel (7.1%), Rosano Barack (7.1%), Aminusal Amien (6.6%) and Tony Chan (12.5%).

POM was owned by Tommy's Humpuss (25%), Yayasan Dana Pensiun Pertamina (YDPP) (20%), Nusamba (25%) and Pertamina (30%). Humpuss and Nusamba were said to earn US$4 million in dividend annually from POM in 1989 through 1998, larger than the dividend received by the pension fund foundation of Pertamina (YDDP). In the upstream sector, the Cendana family cooperated with foreign investors. Bambang, Tommy, Sigit Haryojudanto and Tutur each has oil and gas contracts under production sharing contract, TAC and other forms of contract. In the directorate of marketing and provision, the family has stake in premix gasoline distribution business. Humpuss and Panutan Selaras owned by Sigit, Giga Intrax, which is partly owned by a younger brother of Ginanjar Kartasasmita, the coordinating minister for economy, finance and industry, and Elnusa of Pertamina cooperated in Premix business. Tutut has stake in pipeline construction business all over Java and in Pertamina oil depots. Business in the downstream sector in the distribution of oil fuels is 60% dominated by Daya Tata Matra owned by Siti Hediati Prabowo.

Bambang, Sigit and Bob Hasan jointly own Samudra Petrindo Asia which dominated at least 70% of oil and gas import shipping. The company has 15 tankers with a transport contracts ranging from 2 to 17 years.

So far the mines and energy ministry has revoked 6 contracts between Pertamina and the Cendana family and cronies tainted with KKN, 8 contracts for government projects for wrong procedure and reviewed four projects based on presidential decrees saving the government a cost of US$ 29.5 million and Rp 1.3 billion. Mark-up cases make up most of irregularities in Pertamina projects. In government projects, irregularities are mainly in tender procedure. Among Pertamina's projects already revoked is the Sembakung TAC oil field handled by PT Genindo EPS Petroleum, a joint venture between PT Genindo Citra Perkasa/affiliate of Bambang Trihatmodjo and Energy Process Services/EPS/Ltd. In this project Bambang's shares were taken over by PT Equatorial from Canada.

Table Pertamina's partners owned or partly owned by Bambang Trihatmodjo
Name of company Partner/shareholders

East Java Power Plant, PT Partner with
 Pasuruan Power Company
Citra Kalimantan Energy, PT Rossano Barack
Bimantara Citra, PT Bambang Trihatmodjo
Trans Java Pipeline (TJP), PT Bimantara Citra (49%)
 Tranaco (28%)
 YDP Pertamina (10%)
 YDP PLN (5%)
 YDP BDN (3%)
 Adhi Raksa Tama (5%)
Atlantic Richfield ARBNI (54%)
Bali North Inc. (ARBNI)
 BP Exploration (36%)
 Citra Dura Samudra (10%)
Citra Duta Samudra, PT ARMEI (54%)
 British Gas (36%)
 Pertamina (10%)
Genindo Western Petroleum Equitarial, Canada
Pty. Ltd. Western Petroleum
 Lapindo Inc.
Genindo EPS Pet, PT Genindo Citra Perkasa
 (Bambang Trihatmodjo, 35%)
 Energy Process Services Ltd. (65%)
Overseas Petroleum and Opic Peudada Corp. (32.5%)
Investment Co. (OPIC) TBE/Bambang Trihatmodjo (35%)
Permindo Oil Trading Pertamina (35%)
 Mindo Petroleum Corp.(65%)
Chandra Asri, PT Bambang Trihatmodjo
 Prayogo Pangestu
Bima Artika Citra, PT Bambang Trihatmodjo

Bima Artika Citra, PT Bambang Trihatmodjo
 Indra Rukmana
Inti Karya Persada Tehnik, PT Bambang Trihatmodjo
 Bob Hasan
Toyo Kanetsu Indonesia, PT Bambang Trihatmodjo
Permindo & Elnusa, PT Pertamina (51,5%)
 Tri Daya Esta/
 Bambang Trihatmodjo (48.5%)
Bukaka Artika Permai, PT Bambang Trihatmodjo
YKPP Usaha Nusa (partner with Bambang Trihatmodjo
PT Bina Jasa Hantarindo
Bimantara owner's)
Dharmasatrya Artha Sentosa Bambang Trihatmodjo
(Datra, PT)
Elnusa & Bimantara, PT Bambang Trihatmodjo
Bimantara Citra, PT idem
Medcom/Elnusa, PT idem
Elnusa Reka Bina, PT idem
Elnusa Ehaesindo, PT idem
Graha Centermine, PT idem
Asia Pacific Petroleum Bambang R Soegomo
Refinery Indonesia, PT Bambang Trihatmodjo (40%)
 BJ. Kim (50%)
Bimantara Citra, PT Bambang Trihatmodjo
Samudra Petrindo Asia, PT Bambang Trihatmodjo
Persada Pamunah Bambang Trihatmodjo
Limbah Industri, PT
Samudra Petrindo Asia, PT Bambang Trihatmodjo
Liquimarine Gandria Shipping LGS a LGC (51%)
and Liquimqrine Gandria Samudra Petrindo Asia (49%)
Chartering, Grand Cayman
(Consortium PT Bimantara)
Individual Bambang Trihatmodjo

Name of company Activities/project

East Java Power Plant, PT Gas trading
Citra Kalimantan Energy, PT Gas trading
Bimantara Citra, PT CO2 trading
Trans Java Pipeline (TJP), PT Kangean pipeline
Atlantic Richfield PSC Ons/Off Kangean,
Bali North Inc. (ARBNI) East Java
Citra Duta Samudra, PT PSC Offs Sepanjang
Genindo Western Petroleum PSC-JOB Ons/Offs Simenggaris,
Pty. Ltd. East Kalimantan
Genindo EPS Pet, PT Sembakung field TAC
Overseas Petroleum and PSC Offs Peudada, Aceh
Investment Co. (OPIC)
Permindo Oil Trading Idem
Chandra Asri, PT Naphtha trading
Bima Artika Citra, PT TEL procurement through tender
 between agents named by factory
Bima Artika Citra, PT Procurement of additives for
 gasoline (OGP 2238)
Inti Karya Persada Tehnik, PT Trains F, G and H of
 LNG project
Toyo Kanetsu Indonesia, PT Train G tank
Permindo & Elnusa, PT Modification of Balikpapan II
 refinery
Bukaka Artika Permai, PT ADO & Residue tanks,
 Dumai Structural Steel
 Cilacap Debottlenecking
 Sports buildings of
 Train H LNG project
YKPP Usaha Nusa (partner with Java LNG terminal proposal
PT Bina Jasa Hantarindo
Bimantara owner's)
Dharmasatrya Artha Sentosa Idem
(Datra, PT)
Elnusa & Bimantara, PT Idem & LSWR terminal Pulau Sambu
 Build & Transfer Project
Bimantara Citra, PT Instrumentation retrofit proposal
 Trains A, B, C, D
Medcom/Elnusa, PT Apply 2000 UP VI proposal
Elnusa Reka Bina, PT Maintenance service
 Information system SIE, RPSS
Elnusa Ehaesindo, PT Software application EHS,
 LAN network application CIES 2
 & CIES 3
Graha Centermine, PT Asphalt Plant Balikpapan
Asia Pacific Petroleum Oil refinery 300 MBSD
Refinery Indonesia, PT Situbondo , East Java
Bimantara Citra, PT Power Plant Cilacap
Samudra Petrindo Asia, PT Cooperation with Kvaerner for
 LPG Floating Storage & Offloading
Persada Pamunah Waste management
Limbah Industri, PT
Samudra Petrindo Asia, PT Crude oil transport contract
Liquimarine Gandria Shipping idem
and Liquimqrine Gandria Supplier Base Oil
Chartering, Grand Cayman Penyalur Super TT and
(Consortium PT Bimantara) Premix Filling station and
 bulk transport of Elpiji
 in Sawangan, Bogor
Individual SPBU 44.0630, Sleman

Source: Pertamina/Data Consult
COPYRIGHT 1999 P.T. Data Consult, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1999 Gale, Cengage Learning. All rights reserved.

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