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Pertamina to Halt Operations at Oil Trading Arm Petral

Source: Reuters 5/13/2015, Location: Asia

Indonesian state-owned energy firm Pertamina will disband its oil trading arm, Petral, its chief executive said, in keeping with government efforts to clean up the country's graft-tainted oil sector.

Indonesia is looking to restore investor confidence in Southeast Asia's biggest crude producer after a series of corruption scandals led to the downfall of top oil officials under former president Susilo Bambang Yudhoyono.

Since taking office last October, President Joko Widodo has already imposed major changes to the oil sector, including the dismissal of Pertamina's board.

These measures have been a brightspot for Widodo's anti-corruption credentials, which have recently come under fire by the weakening of a widely popular graft-fighting agency.

Petral, which has assets of $2 billion, has held a near monopoly on the trading of crude and oil products in and out of the country, supplying the former OPEC member with a third of its daily oil needs. The rest of the country's needs are produced locally.

Pertamina took over the buying of crude and oil products from its Hong Kong-based unit earlier this year.

"We see that the role of Petral is not significant in Pertamina's business. We report that Pertamina will stop Petral (operations)," Pertamina's CEO Dwi Soetjipto told reporters.

Petral and its subsidiaries will be liquidated by April 2016 at the latest.

Pertamina's decision follows recommendations by an oil and gas reform team set up in November to improve transparency.

"There has always been a negative perception towards Petral's reputation. There are a lot of practices that are suspected of not being transparent," said energy minister Sudirman Said.

Petral officials have denied any wrongdoing.

Indonesia hopes to eventually 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.

Southeast Asia's largest economy currently imports around 500,000 barrels of oil products a day and is expected to become the world's largest gasoline importer by 2018.

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