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In cooperation with the West Java government and related business associations, the Medco Group through PT Meta Epsi Drilling Company (Medco) plans to set up a consortium to build an industrial estate in Bandung, West Java. An agreement on the project site was signed recently (November 1997). In addition to the West Java Administration and the associations, the Medco Group has also invited the Zerro Emission Group from Switzerland to take part in the project. The Tokyo University and the Social Project Management also support the construction of the industrial estate. The project is estimated to cost Rp 2 trillion.

Arifin Panigoro, the founder of the Medco Group has demonstrated his great talent in business by developing his company group into a big empire. After the success in taking over the Tessoro in East Kalimantan hinterland and the assets of Stanvac in Sumatra, the indigenous Indonesian businessman expanded his business operations abroad. Through one of his subsidiary companies, Expans, he won an oil concession in Kazakhstan, Central Asia.

The success brought Arifin to a face to face meeting with President Suharto in Bina Graha last August. The audience was only to convey a personal letter from the Kazakh president, but it came at the same time with a report saying that Caltex's oil contract on the Coastal Plain block in Pekanbaru would not be extended after its termination in 2001. This led to Speculation that Medco would take over from Caltex as Pertemina's contractor for that oilfield.

The Medco Group through PT Semen Gombong planned to build a cement plant in 1997. Construction of the cement factory was to start in October 1996, but for some reasons including the delay in the site plan tender and the rejection of the forestry ministry to grant concession over the forest land, construction has to be postponed, but construction is to start by the end of 1997.

The project is estimated to cost Rp 1.1 trillion and it is expected to come on line in 1999. It will have an annual capacity of 1.9 million tons. The main contractor for the construction of the plant is a consortium composed of Krupp Polysius AG and Dickerhoff & Wydman AG from Germany and PT Rekayasa Industri. The factory will need 40 MW of electric energy to be supplied by PLN.

In July 1997, the Medco Group sought to acquire 35% of the shares of Texaco, a U.S. oil and gas company which operates an offshore gas field in Yetagun, Myanmar through international tender. Texaco, which partly owned by Nippon Oils, Premier and Petroleum Authority of Thailand PTT has signed a sales contract for gas starting in the year 2000. Under the agreement Texaco will supply PTT with 400 million cu.ft. of gas annually for 20 years. Therefore, the company will have a captive market.

Earlier a subsidiary of the Medco Group PT Exspan Sumatra signed three gas production sharing contracts for 20 years in Myanmar. Under the contracts Medco will cooperate with Myanmar Oil and Gas Enterprise (Moge).

The exploration contracts cover three blocks namely Block RSF-5, Block MOGE-4 and Block EP-1. In the first 5 years Medco will spend US$ 21.6 million in investment.

In July 1997 the Medco Group took over 49% of the shares of a British company, Dragon Oil, worth US$ 60 million. The Medco Group plans to assign Dragon Oil to look after its oil interests in Europe and Central Asia. PT Rexspan will concentrate in the Asia Pacific region including Indonesia.

With Dragon Oil in Britain, the Medco Group now has business operations in four countries. Earlier the company group already had subsidiaries operating in Turkmenistan, Kazakhstan and Myanmar.

Through PT Meta Epsi Engineering, the Medco Group set up a joint venture in May 1997 with Pauwels International NV. The joint venture PT Pauwels Trafo Asia will assemble transformers. The plant is now under construction.

The Medco Group has two holding companies PT Meta Epsi Duta Corporation and PT Meta Epsi Intidinamika Corporation. The two holding companies have subsidiaries operating in nine business areas -- telecommunications, food, property, energy, manufacturing & trading, hotelry, construction, and fabrication, finance and agribusiness. Among the 61 subsidiaries of the Medco Group, two have been publicly listed namely PT Medco Energi Corporation (MEC) which operates in the energy sector and PT Grahamas Citrawisata operating in the hotel business.

The company group is intensively developing business in the petrochemical sector. The company group plans to make petrochemical manufacturing as one of its core businesses. The Medco Group hopes to have 5 core businesses. Now it already has three core businesses including in oil and gas drilling contracting, property development especially in hotel operation and steel fabrication. It hopes to expand its core business into oil and gas exploration and exploitation and petrochemical manufacturing sectors.

Table - 1 Several subsidiaries and affiliates of the Medco Group
Name of companies Line of business

Leading members:

-Apexindo Pratama Duta, PT -Oil & gas drilling services
-Bina Inti Dinamika, PT -Hotelry development
-Citra Pacific Aromatic Indonesia, -Aromatic centre
-Exspan Sumatera, PT -Oil & gas exploration &
-Grahamas Citra Wisata, PT -Hotelry development
-Graha Niaga Tata Utama, PT -Property
-Kaltim Coal Mining, PT -Coal mining
-Kujang Eurapipe Indonesia, PT -Steel pipe industry
-Medco Energi Corporation, PT -Energy development
-Medco Methanol Bunyu, PT -Methanol industry
-Meta Achipelago Hotels -Hotelry development
-Meta Epsi Antareja Drilling, PT -Oil & gas drilling services
-Meta Epsi Duta Corporation, PT -Holding company
-Meta Epsi Drilling COo (MEDCO), PT -Oil & gas drilling services
-Meta Epsi Engineering, PT -Engineering contracting
-Meta Epsi Intidinamika Corp. PT -Holding company
-Meta Epsi Pribumi Drilling Co., PT -Oil & gas drilling services
-Meta Epsi Trading, PT -General trading
-Multi Fabrindo Gemilang, PT -Steel fabricating and steel
-Nusa Telekomindo Indonesia, PT -Telecommunication operator
-Sentrafood Indonusa Corporation, PT -Instant noodles (Food)
Other members
-Central Asia Petroleum Ltd., PT -Oil & gas drilling services
-Dragon Oil PLC., (United Kingdom) -Oil & gas exploitation
-Exspan Inc. -Oil & gas exploitation

Source: Data Consult

The name of Medco, which comes from Meta Epsi, is a Greek letter an abbreviation of Mekanikal and Elektrikal. The founder's of the company group are machine and electrical engineers.

The company group was founded by Arifin and his engineer friends from the Bandung Institute of Technology. But later his friend left him to continue the running of the company. Arifin succeeded in running the company alone. In 1996, the assets of his company were estimated at Rp 3.2 trillion. The sales turnover of the company group amounted to Rp 745 billion in 1997 placing it in the ranks of the country's medium conglomerates. Another subsidiary PT Medco Engineering plans to go public this year.

Starting as contractor

After completing his study in the prestigious ITB majoring in electrical engineering in 1973, Arifin, who was born in Bandung on March 14, 1945, set up PT Meta Epsi Engineering in 1975 together with a number of his friends. The company started as a contractor and then it changed operation to welding. On advice of Wiarso, then mines and energy director general, Medco entered into the oil sector operating in oil drilling.

To support its operation in the oil drilling business, Medco set up PT Multi Fabrindo Gemilang in 1983. The new company operates in steel fabricating industry with an annual capacity to produce 200,000 tons of spheric tanks, 1,000 tons of moorings buoys, 360 pressure vessels, 500 tons of process piping, 16,000 tons of towers and 30,000 bridges. This company has also produced gas and oil tanks used by Pertamina and PT Caltex.

Another subsidiary operating in steel industry is PT Kujang Eurapipe Indonesia which produces steel pipes. In 1984, through Medco, Arifin and his friends became official contractors in oil drilling. Its first contract was with Pertamina followed with contracts with other oil companies including Mobil Oil.

After ten years in oil drilling Medco knew much about business in the oil sector and began interested in having its own oilfield. In 1990, Arifin started looking for oil companies wanting to sell their oilfields. His first step was approaching Tessoro, which wanted to sell its oilfield in East Kalimantan. In 1992, Tessoro finally agreed to sell two of its oilfields to Medco: the Sanga Sanga and Tarakan oilfields. The names of the two oilfields were then changed into Exspan operated by PT Exspan Kalimantan, which now has a subsidiary PT Exspan Tarakan.

After the success in the deal with Tessoro, Medco went further to look for more oilfields. But only Stanvac agreed to sell its oilfield to Medco after the latter won a fight against 30 other interested investors. Medco spent US$ 88 million for the take over in 1995. The oilfield in Sumatra is operated by PT Exspan Sumatra, which has four subsidiaries namely PT Exspan Airsenda Inc., PT Exspan Airlimau Inc., PT Exspan Pasemah Inc., and PT Exspan Exploration & production Inc. The oil field now produces 19,000 barrels of oil a day and the two other oilfields bought from Terroso produce 6,600 barrels a day, up from 4,800 barrels previously. The oilfields have a total reserve of 20 million barrels.

PT Meta Epsi Antareja Drilling Co. (MEAD) in September 1996 won a contract to drill geothermal well in Pangalengan, Bandung, West Java from PT Mandala Nusantara of the Humpuss Group. The geothermal project is to have a power generating capacity of 310 MW. The Pangalengan well was the second geothermal drilling project handled by PT Medco Epsi Antareja Drlling co. The first was second in Ulumbu, Flores, East Nusatenggara.

The Medco Group now has 8 subsidiaries operating in the drilling of on and offshore gasfields. Four largest among the 8 subsidiaries are PT Medco, PT Apexindo Pratama Duta, PT Meta Epsi Pribumi Drilling Co. and PT Mega Epsi Antareja. The comoany group has 13 rigs.

PT Medco Energi Corp in partnership with Enron Development Corporation planned to build a steam and gas power generating station (PLTGLU) in Samarinda, Fast Kalimantan with an investment of US$ 37.5 million. Construction of the first phase of PLTGU project was to be completed in 1997, to be followed by the second phase in 1999. But until now construction has not yet started as negotiation with the Mines and Energy Minister and PLN has not yet been concluded.

The Medco Group has also entered into the property sector. It has property projects in a number of large cities. In Bandung it has PT Meta Reksa Adiwisata and PT Bina Inti Dinamika operating the Cileunca golf course and resort and Grand Preanger hotel respectively. In Bali it has PT Satria Balitama, which built the Hotel Imperial. In Jakarta there are PT Meta Maskana which operates the Jeruk Purut Town House and PT Meta Adoboga which operates the Va Bene restaurant and in Bukit Tinggi there is PT Grahamas Citrawisata, a publicly listed company on the Surabaya Stock Exchange, operating the Novotel Hotel.

In the financial sector the company group has PT Bank Himpunan Saudara 1906 in Bandung. The bank is categorized as small but growing with performance increasing 50% annually. Its assets valued at Rp 142 billion by December 1996 were projected to rise to Rp 210 billion in December 1997.

PT Sarana Jabar Venture has provided venture capital for 130 smalls and medium enterprises in West Java as its business partners.

PT Sentrafood Indonusa Corp operates in instant noodle business by building a factory with an annual capacity of 600 packs a year. It was built at a cost of Rp 40 billion. Its product Salamie has a 5% share of instant noodle market in the country.

In the agribusiness sector the company group has PT Meta Epsi Agro, PT Ciptatani Kumia Sejahtera, PT Metatani Mandang Sejahtera and PT Waringin Agromitra. PT Meta Epsi Agro is developing 40,000 hectares of oil palm plantations in the Natuna islands and 25,000 hectares in Central Kalimantan with a total investment of Rp 480 billion.

Petrochemical sector comes next

The company group's latest expansion plan was in the petrochemical sector. PT Medco Energi Corp. has signed an Operation Cooperation Agreement (KSO) with Pertamina. Under the KSO effective since early 1997, PT Medco Energi Corp. took over the operation of the Bunyu Methanol mill on the Bunyu island in East Kalimantan, which previously was operated by Pertamina itself. The KSO contract is for 20 years during which Medco will operate the plant producing metanol and handling its marketing. But Pertamina remains the owner.

Pertamina handed over the operation of the plant after a decline in the supply of natural gas for that plant. The plant operated below its capacity as a result of the decline in the gas supply.

Under the KSO contract, Pertamina will receive fee and additional income calculated on the production rate. The plant has an annual capacity of 330,000 tons. Now Medco is seeking to increase its production capacity by 20% . For that purpose Medco has set aside US$ 11.5 million. Under Medco the name of the plant was changed into PT Medco Methanol Bunyu.

The Medco Group is developing a natural gas field on the Tarakan island, in Kalimantan to guarantee gas supply for the plant. The gasfield is expected to be able to supply 42 million cu.ft. of gas per day for the plant. The Medco Group has built a transmission pipeline with an investment of US$ 30 million.

In cooperation with the. Bimantara Group and the Barito Pacific Group, the Medco Group plans to build an aromatic center to be operated by PT Citra Pacific Aromatic Indonesia to produce upstream petrochemical products including benzene, toluene and xylene in the complex of PT Chandra Asri Petrochemical Center in Cilegon. Under an agreement signed in August 1997, the Medco Group will hold 21% of the shares, PT Chandra Asri representing the two giant partners will be a 69% shareholder and individual investors will hold the remaining 10%.

The Medco Group also has plan to build an urea fertilizer plant in cooperation with PT Pupuk Sriwijaya through a joint venture company PT Pusri Medco. The project is now under preparation.

Table - 2 The profile of the Mexico Group

Head office : Panin Building 4th floor
 Jl. Jend. Sudirman Kav. 1
City : Jakarta 10270
Phone(s) : (021) 5745272 (Hunting)
Fax No. : (021) 5735611

Number of companies : 61 Companies
Total asset (estimate) : Rp 2,5 trillion (1996)
Sales turn over (estimate) : Rp 650 billion (1996)
Core business : -Steel fabricating industry
 -Oil & gas drilling contractor
 -Property (Hotelry)
 -Energy and Oil & gas exploration
 and exploitation
 -Petrochemical (Aromatic, Methanol)

Chairman : -Mr. Arifin Panigoro

Other key persons : -Mr. John Karamoy
 -Mr. Hitler Singawinata
 -Mr. Setiawan Djody

Source: Data Consult3
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No portion of this article can be reproduced without the express written permission from the copyright holder.
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Publication:Indonesian Commercial Newsletter
Geographic Code:9INDO
Date:Nov 24, 1997

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