December 8, 2014 / 11:18 AM / 3 years ago

UPDATE 1-Indonesia's Pertamina may get funding for reforms, critics sceptical

(Rewrites throughout, with critics of reform effort)

By Wilda Asmarini and Fergus Jensen

JAKARTA, Dec 8 (Reuters) - Indonesia's new government outlined steps on Monday to ensure state energy firm Pertamina has sufficient funding for major reforms in the sector, moves critics say may not be enough to eliminate entrenched corruption.

The former OPEC member hopes to build new storage facilities that will allow it to shift from buying crude, gasoline and diesel on the opaque spot market to stable long-term contracts with foreign producers, and reduce opportunities for mark-ups.

Given the need for funds for new facilities, Pertamina should not have to pay dividends to the government in 2015, said Rini Soemarno, the minister in charge of state firms, adding the government would push it to issue bonds in New York and Indonesia.

"The money will be used by Pertamina for investment in the energy sector, including partnerships for refinery developments and storage facilities," Soemarno told reporters.

President Joko Widodo's administration plans to allow state-owned firms such as Pertamina to use profits for capital expenditure rather than share it with the government, in efforts to support its development goals.

"We are not thinking about privatising Pertamina," Soemarno said. "What is important is that Pertamina is transparent in its reporting and adopts global standards."

"We will increase national reserves, develop storage and upgrade our refinery capacity from 800,000 bpd (barrels per day) to 1.5 million bpd," she said, adding that the planned developments should be completed within four years.

Also on Monday, Pertamina appointed three new directors for its upstream, processing and human resources divisions, after its entire board was dismissed late last month as part of efforts to improve transparency.

Widodo's reforms have already met with scepticism from some lawmakers, NGOs and industry participants.

"When we see headlines like 'war on mafia', we think of James Bond in a silent operation. But when I look at the reform team, they have been passing on a lot of ideas to the media. I actually think this has been unproductive," Reforminer Institute researcher Komaidi Notonegoro said at an oil event on Saturday.

Salamuddin Daeng, chairman of the Political Economy Association, said there was a "hidden agenda" behind the proposal to relocate Pertamina's trading arm, Petral, to Indonesia.

"This is just oriented to replace the importer, without looking at the entire system," Daeng said, urging the government to look at national banks' capacity to fund energy trading.

Kardaya Wardika, who chairs the parliamentary energy and mineral resources commission, said the previous government had also tried to improve governance and he doubted the new team would have any more success.

"The old (team) has been replaced with a different name. That's all. I am not sure they will be able to do what is hoped." (Reporting by Wilda Asmarini and Fergus Jensen; Editing by Alan Raybould)

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