PT. Pertamina.

Backgrounds

The company was established in 1957 with the name of PN Permina. In 1968, PN Permina was merged with PN. Pertamin using a new name of PN Pertamina. In 2003 its status was changed into a limited company called PT. Pertamina (Persero).

PERTAMINA operates in the upstream and downstream sectors of the oil and gas industry. It also operate in geothermal power development. The company has expanded operation abroad especially in oil exploration sector. In the upstream sector it cooperates with contractors mainly foreign investors under the schemes of JOBs (Joint Operating Bodies), TACs (Technical Assistance Contracts) and JOCs (Joint Operating Contracts). Its operations in downstream sector include in processing, marketing, trading and shipping. Commodities produced range from oil fuels (BBM) and Non Fuels, LPG, LNG, petrochemicals and to Lube Base oil.

With the implementation of the Law No. 22/2001, the map of the national downstream oil and gas industry changed totally. Since January 1, 2006, business in the downstream sector of oil and gas industry, previously monopolized by Pertamina has been open to any investors including foreign investors. Pertamina, therefore, has been put in open competition facing rivals including foreign giants in all business areas in which it once enjoyed monopoly.

After the downstream sector was liberalized, many foreign investors have shown strong interest. In facts a number of foreign investors including giants like Shell and Petronas have opened gas filling stations (SPBU). Petronas plans to build 200 nits of SPBU until 2010 and Shell 400 units until 2015.

Pertamina, however, is set to maintain its domination by planning to invest US$ 12.5 billion until 2010 in the downstream sector--including US$ 2 billion for distribution systems and US$ 10.5 billion for refineries.

Business Operation

A. Upstream sector

* Explorations and Production Business

Activities of PERTAMINA in the upstream sector include oil and gas explorations and production and geothermal power development. PERTAMINA through its subsidiary PT Pertamina E&P has expanded operation in upstream sector abroad including in Sudan, Libya and Malaysia.

Explorations and production in the oil and gas sector are handled alone or in cooperation with investors under the schemes of JOB-EOR (Joint Operating Body for Enhanced Oil Recovery), JOB-PSC (Joint Operating Body for Production Sharing Contract), TAC (Technical Assistance Contract), JOB (Joint Operation Body), IP (Indonesian Participation) and PPI (Pertamina Participating Interest), and loan projects. In the geothermal sector it has a cooperation scheme JOC (Joint Operating Contract).

Pertamina has seven Upstream Operation Areas it handles without partnership with other investors including in Nangroe Aceh Darussalam (NAD) Northern Sumatra based in Rantau, Central Sumatra based in Jambi, Southerm Sumatra based in Prabumulih, Western Java based Cirebon, Eastern Java based in Cepu, Kalimantan based in Balikpapan, and Papua based in Sorong.

It has geothermal power generating plants with total installed capacity of 162 MW in three areas including Sibayak (2 MW) in North Sumatra, Kamojang (140 MW) in West Java and Lahendong (20 MW) in North Sulawesi.

In 2004, Pertamina had 92 oil and gas contracts including 6 JOB-EOR, 15 JOB-PSCs, 44 TACs, 27 IP/PPIs (including BOB-CPPs) and 5 loan project. In the geothermal sector it had 8 JOCs.

Among the JOB contracts were Pertamina-Medco Semanggis Pty. Ltd, Pertamina-Exspan Tomori, Sulawesi Ltd, and Pertamina YPF Jambi Merang.

Pertamina also has drilling division called Pertamina Drilling Service (PDS), which has 26 units of rigs and subsidiary PT Usayana, which has 7 drilling rigs. Pertamina also has stake in gas pipeline network totaling 3,800 km and 64 compressor stations.

Its downstream businesses include processing, marketing, shipping and distribution.

B. Downstream sector

* Processing or refinery

Pertamina has 8 oil refineries with a total processing capacity of 1.05 million barrels of crude oil. Some of the refineries are intergrated with petrochemical factory producing non fuel products. Pertamina also has LNG plants in Arun and Bontang respectively with 6 and 8 trains. The Arun LNG plant has a capacity of 12.5 million tons of LNG and Badak LNG has a capacity of 18.5 million tons a year.

Some of the refneries produce LPG such as the refnery in Pangkalan Brandan, Dumai, Musi, Cilacap, Balikpapan, Balongan and Mundu.

The Cilacap refinery is the only one that also produce lube base oil with grade of HVI- 60, HVI--95, HVI-160 S and HVI--650. The production of lube base oil is channeled to Lube Oil Blending Plant (LOBP) to be processed into lubricant oil.

Pertamina's refinery production has tended to decline in the past several years. In 2004, production was enough to meet 75% of the country's BBM requirement, but in 2006 its refineries produced only 688,078 barrels of BBM per day or 60% of the country's BBM requirement of 1.15 million barrels per day.

The decline in output was caused by declining efficiency of the refineries. In 2005, Pertamina could process only 970,860 barrels per day of crude oil producing 734,730 barrels per day (BPD) of BBM far below designed production capacity of 1,041,200 BPD barrels. Pertamina has operated its refineries full time in a year. In Singapore a refinery operates only 216 days a year.

In a bid to increase its production capacity Pertamina has set aside US$ 5 billion. The capacity expansion will be made by phases for the Cilacap and Balikpapan refineries--respectively having a capacity of . 348,000 BPD and 260,000 BPD.

The capacity of the Cilacap refinery is to be expanded to 38,000 BPD. The Cilacap refinery is no operating at around 95% of its capacity to be increased to 100%. The capacity utilization of the Balikpapan refinery will be increased to 95% from 75% at present.

Marketing & Trading of BBM and SPBU

Pertamina operates most of its SPBU units in cooperaiton with partners. There are only a few units wholly owned and operated by Pertamina. The country had 3,500 units of SPBU in 2006.

Many more units of SPBU are still needed in the country. Around 1,000 additional units are needed every year, but sales of non subsidized oil fuel are still low.

In 2005, sales subsidized BBM by Pertamina totaled 56.4 million kiloliters and sales of non subsidized BBM totaled only 6.4 million kiloliters.

Marketing and Trading of Non-oil fuels

Pertamina dominated 68% of the market of LPG (liquefied petroleum gas) in the country. The selling prices of LPG by Pertamina are still below the prices in international market. Pertamina offers a price of US$ 296 per metric ton of LPG as against CP Aramco's US$383 per metric ton.

Pertamina also dominates the market of lubricant oil. Its ales of leubricant totaled 350,000 kiloliters valued Rp4 trillion in 2006 or 54% of the domestic market

According to the association of motor vehicle industries (Gaikindo), Indonesia needs around 625,000--650,000 kiloliters worth Rp 8 trillion of lubricant a year.

The entry of foreign players in the business resulted in a sharp fall in the market share of Pertamina. Before the market liberalization, Pertamina dominated 90% of the lubricant market in the country, but now it has only a 54% share of the market. Pennzoil Evalube has a market share of 12%, Top1 11%, Castrol 5%, Agip 5%, Shell 3%, Motul 1%, etc.

Conclusion

Pertamina still lead in the market but its domination has been shrinking after the liberalization in 2001, allowing foreign players to enter the business in the downstream sector of the oil and gas industry.

In a bid to maintain its domination, Pertamina plans to improve its refineries expanding their capacity for BBM now 1.05 million BPD. Until 2010, Pertamina plans to spend US$ 12.5 billion including US$ 10.5 billion to build new refineries and US$ 2 billion to expand its distribution systems.

Pertamina is facing stronger rivals in the BBM market with the emergence of powerful investors such as. PT Sigma Rancang Perdana, which plans to invest US$ 250 million to operate in the business area, PT Kridapetra Graha, which operates Shell's SBPU and has invested US$ 35 million and PT Petronas Niaga Indonesia, which operates Petronas SPBU and has invested US$ 30 million.

List of Pertamina's subsidiary companies :

1. PT. Elnusa (Processing and Marketing of oil and gas, construction service, information technology, etc)

2. PT. Patra Jasa (Hotel and office building management)

3. PT. Pertamina Tongkang (Shipping non tanker)

4. PT. Pertamina Bina Medika (Hospital).

5. PT. Patra Dok Dumai (Ship dock & reapairing service)

6. Pertamina Energy Trading Ltd. (PETRAL) in Singapore (Crude oil trading)

7. PT. Usayana (Drilling Service)

8. PT. Pertamina Dana Ventura (investment)

9. PT. Pertahulu Energi (upstream business)

10. PT. Pertamina Training & Consulting (humen resources management)

11. PT. Tugu Pratama Indonesia (insurance)

12. PT. Pertamina Retail (Lub processing and marketing)

13. PT. PERTAMINA EP (oil & gas exploration)

14. PT. Geo Dipa Energi (geothermal exploration).

15. PT. Pertamina EP Cepu (oil & gas exploration)

16. PT. Pertamina Geothermal Energy (geothermal exploration)

17. PT. Pertagas (oil & gas exploration)

Financial Highlights
PT. Pertamina.

                                 (in Rp trillion)
Description                            2004
                                    (31st Dec)

ASSETS
a. Current Assets                           54.96
b. Non Current Assets                      126.59
Total Assets                               181.55
LIABILITIES
a. Current Liabilities                      38.97
b. Non Current Liability                    34.75
c. Equity                                  107.83
Total Liabilities + Equity
REVENUES                                    57.18
a. Revenue                                   2.52
b. Net Profit

Source: Financial report of Pertamina