With a population of 230 million, Indonesia has a material and promising market and is a potential destination for retail station business development in South East Asia due to its market size and opportunity, which creates a strategic fit with British Petroleum (BP) strategy.



Recent political, economic and social upheavals in Indonesia are now demanding transparency, change and efficiency. As a result, a series of new downstream deregulation bills have been approved by Indonesian's parliament and the implementation laws are being discussed up at Indonesian's government together with ir'1dustry players. This situation obviously raises the opportunity for BP to enter Indonesia downstream market although the fuel price still remains uncertain, given there's still significant subsidy content.



BP has capacity and capability to take advantage of this opportunity by capitalizing its strong comprehensive business presence in Indonesia combined with it internal competitive strengths of excellence in production and more marketing company post Amoco-Arco-Castrol acquisition.

Entry mode of joint venture (JV) with Pertamina is reckoned as the most preferable options for BP to take because of its best risk-return for combined key success factors of first moving advantages, capital requirement, risk, immediate market share and access, source of supply and access to infrastructures.

By doing JV with Pertamina, BP can obtain at least 15% return out of its US$280 millions investment through 800 service stations during 10 years.

In realizing the option of JV with Pertamina, BP has to win competition among the new entrants, given Pertamina is being positioned as the preferred partner for almost all the new entrants. BP should quickly develop program to approach Pertamina for the JV option by utilizing the currently close relationship with Pertamina downstream as well as the entire available channel as a result from already strong presence of BP's other business units in Indonesia.

Should the option of JV with Pertamina fail, BP has to prepare an alternative plan as a back up strategy in which it involves basically almost all of those activities BP has to do had it takes a stand alone investment instead.



Research Location: British Petroleum

Supervisor: Feraldi W. Loeis

Accepted: 31 August 2003