INDONESIA - GOI FINALLY PURGES PERTAMINA BOARD

UNCLAS SECTION 01 OF 02 JAKARTA 003162 SIPDIS DEPT FOR EAP/IET, EB/ESC/IEC DEPT PASS OPIC, EXIM, TDA DOE FOR CUTLER/PI-32 AND NAKANO/PI-42 COMMERCE FOR USDOC 4430 SIPDIS SENSITIVE E.O. 12958: N/A TAGS: EPET ENRG EINV PREL PINR ID SUBJECT: INDONESIA - GOI FINALLY PURGES PERTAMINA BOARD ¶1. (SBU) On March 8 the Government of Indonesia (GOI) replaced the head of state oil and gas company Pertamina after more than a year of unfulfilled promises to shake up Indonesia's most powerful state-owned enterprise. Ari Sumarno succeeds Megawati-era appointee Widya Purnama as President Director. Sumarno, formerly director of trade and marketing, has won the respect of colleagues throughout the industry. One expatriate oil executive told us that he is a "straight shooter" and someone with whom foreign energy companies can do business. The change at the top is a clear signal that the GOI wants to break the four-year stalemate with ExxonMobil over the Cepu oil and gas field in Central Java, according to many local observers. Sumarno told the local press shortly after his appointment, "The most important thing is to increase the Cepu block production." Iin Arafin Takhyan, the top civil servant for oil and gas in the energy ministry, moves over to be number two at Pertamina as part of the leadership changes. ¶2. (U) Below is a list of the new management at Pertamina and biographic information for the key newcomers. Pertamina New Management -------------- Table 1: New and former Members of the Board -------------- Former Position New Officer Officer -------------- -------------- President Director Ari H Sumarno Widya Purnama Vice President Iin Arifin Mustiko Saleh Takhyan Directors - Upstream Sukusen Hary Kustoro Soemarinda - Refining Suroso Suroso Atmomartoyo Atmomartoyo - Trade and Marketing Achmad Faisal Ari H Sumarno - General Affairs and Sumarsono Suprijanto Human Resources - Finance Frederick ST Alfred Siahaan Rohimone Pertamina also has a Board of Commissioners, who represent the GOI's ownership interest in the firm and act as advisors to the directors. The GOI made only one change to this board with the appointment of J. Purwono, a staffer at the State-owned Enterprise Ministry for investment to replace Iin Arifin Takhyan. Biographic Information -------------- ¶3. (U) Ari Sumarno, former Director of Marketing and Trading for Pertamina, replaced Megawati-era appointee Widya Purnana. Sumarno is the son of General Sumarno, former Jakarta governor in the 1960s and older brother of former Minister of Industry and Trade Rini Soewandi. Sumarno worked as an engineer at the Bontang Liquified Natural Gas (LNG) plant in East Kalimantan for 16 years before moving to Pertamina's headquarter as a special staffer in the downstream directorate in 2001. He was appointed president director of the company's Hong Kong-based trading subsidiary, Pertamina Trading Ltd (Petral) in October 2003. Sumarno was promoted to Director of Marketing and Trading in ¶2004. He was born in Yogyakarta in 1948 and holds a degree in chemical engineering from Aachen University, Germany. ¶4. (SBU) Local magazine Kompas reported in 2004 that Sumarno received a reprimand in the form of a salary cut in 1995 for violating bidding regulations when he was chairman of the bidding team for the Bontang LPG Plant project. According to this story, an audit conducted by the Finance and Development Control Agency BPKP) revealed that Pertamina incurred Rp 1.2 billion in losses (approximately USD 130,000) from the bids in question. Sumarno's former deputy at Petral, Zainul Arifin, has been detained on corruption charges since December 2005. Zainul allegedly deposited USD 9 million of company funds in a Singapore Bank without board approval. Zainul has alleged that Sumarno was fully aware of Zainul's actions, a charge Sumarno strongly denies. JAKARTA 00003162 002 OF 002 ¶5. (U) Iin Arifin Takhyan was the Director General of Oil and Gas in the Ministry of Energy and Mineral Resources and a Pertamina commissioner before his appointment as vice president replacing Mustiko Saleh. From 1998 to 1999, Arifin was the Director of Exploration and Production at the Directorate of Oil and Gas and Indonesian representative to the Organization of Petroleum Exporting Countries. In 2001, he was promoted to director of Production Sharing Contracts (PSC) management in Pertamina. He became Director General of Oil and Gas in 2004. Arifin was born in Tasikmalaya, West Java in 1952. He has a degree in petroleum engineering from Bandung Institute of Technology. He also studied geothermal energy technology and environmental economics at the University of Auckland, New Zealand. PASCOE