State owned energy giant Pertamina has been gasping for air as the government decided to maintain the prices of certain fuels amid mounting tasks the company has to accomplish in the upstream and downstream oil and gas sectors.
In accordance with global oil prices, the government in 2015 decided to evaluate once every three months the price of Premium gasoline - which has a research octane number (RON) of 88 as well as subsidized diesel Solar and kerosene.
Since April 2016, however, the government has been ignoring the recovery in global crude oil prices, as it maintained fuel prices at Rp 6,450 (49 US cents) per liter for Premium, Rp 5,150 per liter for Solar and Pip 2,500 per liter for kerosene.
The Indonesian Crude Price (ICP), a benchmark to calculate non-tax income in the state budget, averaged at $48.86 per barrel during nine months of 2017, up 28.9 percent from the corres ponding-period last year. During the same period, Pertamina’s revenue climbed by 17.8 percent year-on-year to $3 1.38 billion, but its net income fell by 29.7 percent to $1.99 billion due to a 27 percent increase in its cost of goods sold and operating expenses.
Had the prices been adjusted in accordance with the set formula, Pertamina would be able to gain extra $1.42 billion in revenues and $1.06 billion in net income, said the company’s president director Elia Massa Manik on Thursday.
“As there had been no adjustment, we could only record $ 31.38 billion [in revenues],” Elia said.
Although Pertamina was able to survive amid the governments mandate to implement the one fuel-price policy, the expected additional $1.06 billion could have been used to accelerate the company’s investment, he said.
Under the one fuel-price policy, Pertamina plans to establish fuel distribution agents in 150 remote locations by 2019 in order to keep prices of Premium and Solar at the same level in those areas.
Pertamina has estimated it Will have to spend Rp 800 billion to penetrate 54 locations through-out this year alone and Rp 5 trillion to realize the policy in all 150 locations by 2019.
The government still owed Pertamina Rp 22 trillion in subsidies for the sale of subsidized 3-kilogram liqueiied petroleum gas (LPG) canisters and subsidized Solar diesel, according to 2016 data.
Moreover, the government had yet to pay Ptp 8,4 trillion for supplies of gasoline from Pertamina to the Indonesian Military since 2014.
“For the ongoing year, there have been additional debts worth Rp 10 trillion as well. We’re still discussing it with the government, but hopefully, it can repay some of the debts this year,” Pertamina finance director Arief Budiman said.
Energy and Mineral Resources Minister Ignasius Jonan had acknowledged Pertamina’s financial situation, but said that all of the company’s linancial burdens in the downstream sector would be offset with revenues coming from upstream oil and gas working areas mandated to the firm.
For instance, Pertamina will oflicially take over full operations at the gas-rich Mahakam block in East Kalimantan on Jan. 1, 2018 from France oil and gas giant Total E&P Indonesie (TEPI). TEPI currently holds a 50 percent stake in the block, while its Japanese partner Inpex controls the remainder.
is an effort to maintain continuity and a stable level of Mahakam blocks oil and gas production post-takeover, Pe rtamina has planned to start drilling 14 wells there this year with investment worth at least $180 million.
“So, we can only bear the fruit from the Mahakam block far in the future. But first we need to invest a huge amount of money to maintain the block’s production,” Elia said.
Between January and September, Pertamina produced 342,000 barrels of oil per day (bopd) and 2,030 million standard cubic feet per day (mmscfd) of gas, up 10.6 percent and 3.94 percent from the previous year, respectively.
THe Jakarta Post, Page-13, Friday, Nov 3, 2017
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