Targeting oil ‘mafia’: A gimmick or genuine fight against corruption?

President Prabowo Subianto has vowed to crack down on mafia-like practices in the oil and gas industry, after an ongoing probe named nine executives as suspects in a case on fraudulent crude oil and fuel trading, estimated to have incurred state losses of Rp 193.7 trillion (US$12 billion) between 2018 and 2023. The outcome of this case will be a test of Prabowo’s commitment to fighting corruption in the energy sector, especially as to whether the investigation extends to high-profile figures who might have profited from the illegal activity.

On Monday, the Attorney General’s Office (AGO) arrested seven suspects including Kerry Andrianto Riza, a son of oil tycoon Riza Chalid, dubbed the “oil king” by the media, two other private businessmen and four top executives at Pertamina subsidiaries.

The executives of Pertamina subsidiaries are: Riva Siahaan, president director of PT Pertamina Patra Niaga; Yoki Firnandi, CEO of PT Pertamina International Shipping; Sani Dinar Saifuddin, director of feedstock and product optimization at PT Kilang Pertamina International (KPI); and Agus Purwono, vice president feedstock management at KPI.

The two private businessmen are: Gading Ramadhan Joedo, commissioner of PT Jenggala Maritim Nusantara (JMN) and president director of PT Orbit Terminal Merak, and Dimas Werhaspati, commissioner of JMN and commissioner of PT Navigator Khatulistiwa, of which Kerry Andrianto is beneficial owner.

On Wednesday, the AGO arrested two more suspects, both executives at Pertamina Patra Niaga: marketing director Maya Kusmaya and vice president trading operation Edward Corne.

According to the AGO, the suspects allegedly violated a ministerial regulation requiring domestically produced crude oil to be refined at facilities operated by PT Kilang Pertamina International. Instead, they claimed that domestic crude was unsuitable for local processing, exported the fuel at favorable prices and arranged crude oil imports for Pertamina refineries at spot market prices for personal gain.

To maximize their earnings, the suspects allegedly imposed an inflated 13-15 percent transportation fee through Pertamina International Shipping.

The AGO probe also found that the suspects deliberately reduced the processing capacity at Pertamina’s refineries to create artificial demand for imported fuel. Further, they allegedly imported lower-quality fuel with a maximum octane level of RON-90 but billed Pertamina for RON-92 octane fuel. The lower-octane fuel was then blended at Patra Niaga facilities and sold as RON-92 Pertamax fuel.

The findings of the AGO investigation align with decades-long suspicions of an entrenched oil “mafia” operating in Indonesia that dates back to even the New Order regime, when Indonesia was a net crude exporter. Indonesia became a net importer in 2004, when national oil production stood at 1.13 million barrels per day (bpd). Today’s output is below 600,000 bpd, while demand exceeds 1.3 million bpd.

When Joko "Jokowi" Widodo took office in 2014, he formed an anti-oil and gas mafia task force with an aim to dismantle the corrupt practices that had hindered the country from building new refineries for over 35 years, forcing it to rely heavily on crude and fuel imports.

The task force’s investigation, supported by a forensic audit by advisory firm KordaMentha, exposed corruption within Pertamina Energy Trading Ltd. (Petral), another subsidiary of state-owned Pertamina. The audit, which covered the 2012-2014 period, discovered that third parties had manipulated procurement and purchasing at Petral’s subsidiary, Pertamina Energy Services, to incur estimated state losses of Rp 250 trillion. Despite the massive corruption, only former Petral president director Bambang Irianto was prosecuted.

At the beginning of his second term, Jokowi acknowledged that the oil mafia remained active and that its clandestine activities continued to worsen Indonesia’s trade deficit in oil and gas. However, his administration ultimately failed to take decisive action against the entrenched practice.

When Prabowo Subianto assumed the presidency last October, he revealed a national agenda prioritizing energy self-sufficiency. Energy and Mineral Resources Minister Bahlil Lahadalia subsequently announced plans to ban crude and gas exports, requiring Pertamina to refine all domestically produced crude oil.

In parallel, the newly established Danantara sovereign wealth fund, armed with an initial $20 billion in capital and $900 billion in assets under management of state-owned enterprises, announced refinery development as a key investment priority to meet domestic fuel demand.

The Prabowo administration’s crackdown on the oil mafia is part of these broader efforts. Kerry Andrianto’s naming as a suspect in the Pertamina Patra Niaga graft case has shocked many, as his father Riza Chalid had supported Prabowo’s presidential bid in 2014. The AGO has raided Riza’ offices and residence, which could indicate his possible link to the corruption case through his son.

However, whether the Prabowo administration will go beyond targeting a few individuals and actually dismantle the deep-rooted network of the oil mafia remains to be seen.