Negative sentiment takes down Petronas

(Jakarta Post) – Malaysia-based oil and gas company Petroliam Nasional Bhd (Petronas) has suspended most of its gasoline stations in Indonesia amid depressed sales, a move seen by many as partly influenced by persistent negative public sentiment toward the neighboring country.

Energy and Mineral Resources Ministry’s downstream director Umi Asngadah said on Wednesday that 15 out of 19 Petronas fuel stations had been closed down.

“They have been experiencing such low sales that they can no longer fund their operations,” she said in a text-message to The Jakarta Post.

PT Petronas Niaga Indonesia, a local subsidiary of the Malaysian firm, is likely to sell the suspended gasoline stations to other firms, according to Umi, who added that Petronas would focus on other petroleum products such as lubricants.

Petronas has been among the competitors of state owned PT Pertamina in the marketing and distribution of petroleum products in Indonesia since the liberalization of the market in 2006.

Other competitors are PT Shell Indonesia, the local subsidiary of global oil and gas giant Royal Dutch Shell, and France-based Total Oil Indonesia.

Both foreign subsidiaries are faring much better than their Malaysian counterpart.

Shell Indonesia currently operates 57 gasoline stations in Indonesia, of which 50 are located in Jakarta and the rest in East Java. The company plans to open eight new fuel stations this year.

Total Indonesia is also planning expansion, particularly in Jakarta and Bandung, West Java, adding to the 13 fuel stations currently under its management.

Pertamina, whose stations are managed both directly by the company and as a franchise, operates around 5,000 stations. Pertamina is the only company allowed to distribute subsidized fuels.

BPH Migas fuel distribution director Djoko Siswanto said that public sentiment toward Malaysia did play a part of the poor sales of Petronas, saying “there is a tendency from the public to refuse Malaysian products”.

As neighboring countries, Indonesia and Malaysia have experienced a number of problems ranging from territorial issues to national heritage disputes.

“Our people did not like Malaysian products such as Petronas amid several problems both countries had between each other,” he said.

Djoko added that Petronas had also stepped down from vying for a contract to distribute subsidized fuel, expected to be awarded by BPH Migas this year, with Shell Indonesia replacing the Malaysian firm.

Indonesian Twitter users jeered the closure of Petronas stations, with one of them, Ratna Octaviana through her account @nha_octa, said “Good! No more Malaysia in this country.”

Communications expert Effendi Gazali said the decision by Petronas was triggered by two factors.

On one part, he said, Petronas could not give the same treatment to its customers that its competitors had provided.

“On the other hand, the public already has this negativity toward them amid disputes and the treatment our people have received in Malaysia. These two aspects triggered the poor sales of Petronas, hence the decision to shut down their fuel stations,” he told the Post over the phone.

Marketing expert Handi Irawan D., who is chairman of Frontier Marketing @ Research Consultant, said that Petronas, along with other foreign firms such as Shell Indonesia and Total, entered Indonesia in 1998 in the hope that, after the International Monetary Fund liberalized the economy, the country would gradually cut its fuel subsidy.

“They [Petronas] have been waiting for years for Indonesia to cut its subsidy but it never happened. On the other hand, people here prefer to buy Pertamina products because the company has been rehabilitating their services,” he said.

Petronas, he added, was more “realistic” than other foreign competitors in Indonesia, hence they closed down their business on the downstream sector while other foreign firms still wanted “to give it a try”.