[Opinion] Why Indonesia's Energy Sector Is So Corrupt

Indonesia’s Corruption Eradication Commission (KPK) has announced that several high-ranking officials from Indonesian state oil company Pertamina are suspects in a corruption case, including former company president and CEO Karen Galaila Agustiawan, chief legal counsel and compliance officer Genades Panjaitan, and former director of finance Frederik Siahaan. The case centers on Pertamina’s investment in Australia’s Basker Manta Gummy (BMG) oil block in 2009, which caused state losses of more than 568 billion Indonesian rupiah ($41 million).

The BMG block was expected able to produce 812 barrels per day (bpd), but only produced 252 bpd, or just 31 percent of the expected output.

Karen was appointed as CEO of Pertamina to replace Ari Sumarno in 2009 and resigned just two months before the end of Susilo Bambang Yudhoyono’s administration in 2014. She explained her resignation by saying she wanted to spend quality time with her family and decided to accept an offer to serve as a lecturer at Harvard University.

However, former secretary of State Owned Enterprises Indonesia (BUMN), Said Didu argued that Karen resigned because she could not take pressure from within Pertamina regarding the 2014 price increase of liquefied petroleum gas (LPG) which opposed by the government. She could not overcome the political pressure from state and nonstate actors alike, that might lead her to suffer legal risk as a scapegoat.

Karen was actually successful in leading Pertamina, which recorded its highest-ever earning ( around $2.7 billion )under her leadership in 2012, and acquired assets from Conoco Phillips in Algeria and Exxon Mobil in Iraq. The first women to be appointed director of a state-owned company in Indonesia, Karen was included in Fortune Magazine’s 2014 list of the 50 most powerful women.

Karen is not the only elite in Indonesia’s energy sector facing corruption allegations. Rudi Rubiandini, the former director of special task force for upstream oil and gas business activities at SKK Migas was sentenced to seven years in prison and fined $14,500 because he accepted bribe of $900,000, from elites in SKK Migas and $180,000 from Widodo Ratanachaithong, CEO of Kernel Oil Pte, regarding regulations on limited auctions of crude oil and condensate.

During Rubiandini’s trial, Karen and Rubiandini admitted that there is an idiom in energy politics called “open the drum and close the drum.” “Open the drums” refers to bribes from SKK Migas to the government’s Ministry of Energy and Resources (ESDM) and “close the drum” is a bribe to Commission VII (covering energy, mineral resources, research, technology, and environmental affairs) of the House of Representative (DPR).

Read the full original article at The Diplomat.

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