Pertamina moves forward with a new strategy

Pertamina's new CEO is planning a series of steps intended to support the company's new status as a privatized limited liability company (LLC). Pertamina, Indonesia's state-owned oil and gas company was granted LLC status in September.

Pertamina's new CEO is planning a series of steps intended to support the company's new status as a privatized limited liability company (LLC). Pertamina, Indonesia's state-owned oil and gas company was granted LLC status in September.

Arrifi Nawawi, the newly appointed CEO, says that in the next three months, his priorities will be to increase the pace of restructuring Pertamina and to ensure management and staff are aligned to the objectives of Pertamina as an LLC. "Pertamina has become an LLC, and by becoming an LLC, we must follow the rules of transparency and good governance," Arrifi said.

Pertamina expects progress in the coming year, with forecasted profits of $1.3 billion. Joint cooperation between Pertamina and ExxonMobil to develop oil and gas reserves in the Cepu block offshore Java is well underway. Now, Pertamina is considering moving the Donggi gas development project in the Celebes forward and pursuing LPG development in South Sumatera.

Efforts at changing Pertamina's image and structure are closely related to Arrifi's plans for an IPO in 2007. Arrifi believes it is essential to have a fully developed, transparent and law abiding institution, in order to position the company for a successful IPO.

According to Pertamina's business plan, Pertamina will focus 70% of its resources on upstream operations and will increase production reserves. A holding company will be established that will include upstream subsidiaries such as North Sumatera, South Sumatera, Jambi, and West Java. Pertamina's subsidiaries, Elnusa, Pelita, and Patra Jasa, will either be sold or integrated.

Petral, Pertamina's trading company is to be further developed.

"Every oil company has one big trading company," said Arrifi, "Petral must continue to play as prominent a role with Pertamina as it has since being assigned to trade crude oil."

Arrifi recently cancelled a $90-million bond issued to subsidize the purchase of 12 new tankers, saying the act would decrease profit margins. Arrifi said the project could move forward when the company finds a low-cost alternative. At present, the numbers don't support the move.

"Pertamina is a for-profit operation," Arrifi said. "The return on the tankers is only 8% to 9%. By borrowing 8%, how could Pertamina profit?"

Pertamina, established in 1971, is wholly owned by the Government of Indonesia. The company has eight subsidiaries and 17 joint ventures. Upstream actives include exploration and production. Downstream activities include refining, marketing and trading, and shipping. Pertamina is the largest producer of LNG in the world with 30 million tons/year of production.

11/05/03

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