Two state energy giants, Pertamina and Perusahaan Gas Negara (PGN), have allocated US$ 6.26 billion in capital expenditure (capex) to finance their expansion throughout 2018, despite financial challenges the companies face.
The figure is up more than 60 percent from last year, in the wake of the government’s plan to consolidate the two companies into an oil and gas holding firm. Oil and gas firm Pertamina has set aside US$ 5.50 billion in capex this year up 55 percent annually. About 59 percent of the allocated figure will be used to support its upstream business activities, including the development of the newly acquired Mahakam block in East Kalimantan and the Jambaran-Tiung Biru field in East Java.
Meanwhile, gas distributor PGN plans to spend $668 million in capex this year; a significant jump from the previous $ 300 million. It plans to expand its gas infrastructure nationwide, including by developing more distribution and transmission pipelines as well as household gas networks.
As global crude prices have started to recover, we hope Pertamina and PGN will be able to yield better financial results, amid their aggressive expansion strategy this year,” said Fajar Harry Sampurno, the State Owned Enterprises Ministry’s deputy for mining, strategic industry and media affairs, on Monday.
The price of global benchmark Brent crude reached $70.45 per barrel on Monday, after being traded at $ 66.57 per barrel on Jan 2. Pertamina’s revenues climbed by 17 percent year-on-year to $ 42.86 billion throughout 2017, but its net income fell by 24 percent to $2.41 billion.
The falling income was driven by a 26 percent increase in its cost of goods sold and operating expense in the wake of the governments decision to maintain the prices of Premium gasoline and subsidized Solar diesel.
Pertamina finance director Arief Budiman said the company would try to tighten its belt, especially considering its plan to make huge investments in the upstream and downstream oil and gas sectors.
“If the government still decides to maintain [Premium and Solar] prices, we will have to more tightly [manage] -our operating expenses,” Arief said.
Pertamina has estimated it will need around $120 billion to support its business plans within the next decade, one-third of which will be used to finance various refinery projects.
Pertamina also signed on Sunday a memorandum of understanding with the Bangladesh Power Development Board (BPDB) to develop a combined cycle gas turbine power plant with a capacity of 1,400 megawatts and an investment of $2 billion in Bangladesh.
BPDB will act as the electricity off-taker of the power plant, which is projected to reach financial closure in 2019 and commence operations in 2022. Meanwhile, the prognosis for PGN’s 2017 net profit is Rp 1.4 trillion, down significantly from the Rp 4 trillion profit it booked in 2016. This was triggered by the government’s decision to slash gas prices in the three industries amid sluggish gas demand last year.
Between January and September 2017, PGN distributed 767 million standard cubic feet per day (mmscfd) and transmitted 736 mmscfd of gas, down 3.27 and 8.2 percent, respectively, from the same period in 2016.
“The situation might remain this year as there has been no sign of recovery in industrial gas demand,” PGN finance director Nusantara Suyono said.
Data from PGN show that lndonesia needs to operate gas pipeline networks spanning 57,093 kilometers by 2025 in order to meet the targeted 22 percent contribution from gas to the national energy mix by then. The figure will jump significantly from the required 14,382 pipeline networks in 2016.
Hence, in an effort to create efficiency in downstream gas management, the government plans to transfer the 57 percent of shares it controls in PGN to Pertamina by March as the latter will be transformed into an oil and gas holding company.
The Jakarta Post, Page-13, Tuesday, Jan 30, 2018
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