Pertamina, Indonesia’s state-owned oil and gas company, is set to combine its three main downstream businesses, such as refinery, shipping, and retail, into one entity by the end of 2025. According to a statement made by the CEO, Simon Aloysius Mantiri, during a session with the Parliamentary Commission, the plan entails the merging of units from Pertamina Patra Niaga (retail), Kilang Pertamina Internasional (refining), and Pertamina International Shipping.
From the economic perspective, the integration is to cut down on overlapping parts of the company and hence reduce the cost of running the company. At the same time, better operational coordination will be made possible and redundancies eliminated. In this way, better supply chain management can be achieved. For instance, it could be possible to plan the shipping directly with the refinery output and retail demand. Therefore, this action may enhance the competitiveness of Pertamina, whereby the company could enjoy the increased margins of the fuel supply, distribution, and logistics arms while eliminating losses by making the fuel supply more efficient. In that, a less wasteful downstream operation could also be a basis for Indonesia’s ultimate target of energy security and self-reliance, especially regarding the unstable energy market worldwide.
The merger has multiple political implications as well. The government in this case would be the primary beneficiary. It would become a sign of a much more efficient response to accusations of corruption that appear regularly in the news: The Attorney General’s Office is currently carrying out an investigation into Pertamina, while the former executives are suspected of being involved in a series of cases from 2018 to 2023. The performance aspect alone is not enough; by reputation management, namely, illustrating that the company is introducing structural changes to regain public confidence, the function of merging core units is extended. It also fits in the picture of how the government demands that state-owned enterprises ought to be more open about and be held accountable for their activities.
Moreover, the issue of combined non-core operations with analogous state enterprises also gained political significance. An example of this was a proposition of a merger between Pelita Air (a Pertamina’s airline unit) and the national airline, Garuda Indonesia, practically the oldest government policy in this field. The said consolidations are a product of political tactics for the rationalization of state assets; the complexity of government oversight is reduced, hence, the avenue through which misuse or mismanagement may occur becomes limited.
Finishing the downstream integration by the end of 2025 might point to the issue of urgency, whereby market conditions and the public mood are visibly demanding quick reforms. Nevertheless, the question remains of the difficulties that Pertamina will face while trying to merge; of these, aligning internal cultures, managing labor implications, restructuring governance, and ensuring that efficiency gains do not come at the expense of service reliability or consumer costs are a few of the most critical ones.
In sum, the decision of Pertamina to go down this avenue indicates a shift in strategy in which, favorably, from the economic side, inefficiencies would be minimized and the energy supply chain of Indonesia would be strengthened. Politically, the move becomes an instrument of solving the corruption issues, allowing greater public trust and evidence of government commitment to reform in SOEs by extending the reform agenda through this channel.
