If everything goes as planned, state-owned energy giant Pertamina is set to control about half of national oil and gas production, as well as nearly all of the country’s downstream gas pipelines by the end of 2018, partly owing to the governments role in transforming the company into a holding firm.
The transformation will take place once the government has transferred its 57 percent shares in state-owned gas firm Perusahaan Gas Negara (PGN) to Pertamina, a move that is expected to boost the latter’s value, debt leverage and efficiency.
The process should take place following the issuance ofa Government Regulation (PP/GR) that would serve as the legal basis for the holding firm formation, said Fajar Harry Sampurno, the State-Owned Enterprise (SOE) Ministry’s under secretary for mining, strategic industries and media affairs.
“The draft regulation was submitted to President Joko Widodo on Jan. 31. We hope the draft is signed by the President Within the next one week or two weeks at the most,” he told The Jakarta Post.
“After that, Pertamina will immediately hold an extraordinary general shareholders meeting and conclude its transformation.”
Under the restructuring plan, the operation of PGN’s upstream subsidiary, Saka Energi Indonesia, would later be consolidated with Pertamina’s upstream subsidiaries such as Pertamina Hulu Energi and Pertamina EP As of September 2017, the combined domestic oil production of Pertamina and PGN stood at 276,800 barrels of oil per day (bopd), while their total gas production reached 1,740 million standard cubic feet per day (mmscfd).
The figures accounted for around 35 percent and 27 percent, respectively, of Indonesia’s ready-to-sell production, or also known as lifting. In the same period, Pertamina also booked overseas oil and gas production of 104,000 bopd and 291 mmscfd, respectively It must be noted that the domestic output figures had yet to take into account production from the Mahakam block in East Kalimantan, which was acquired by Pertamina at the beginning of this year from France’s Total E&P lndonesie and Japan’s Inpex.
France’s Total E&P
Mahakam generated 52,000 bopd and 1,255 mmscfd of gas throughout 2017, respectively accounting for 6 percent and 20 percent of Indonesia’s oil and gas lifting that year.
Japan’s Inpex Corporation
As mandated by the government, Pertamina has also stated its readiness to take over eight oil and gas blocks, the contracts of which with their existing operators will expire this year. The blocks are: Tuban, Ogan Komering, Sanga-sanga, Offshore Southeast Sumatra, North Sumatra Offshore, Tengah, East Kalimantan and Attaka.
Oil and Gas Block
As of 2016, total oil and gas production from those eight blocks stood at 47,245 bopd and 452 mmscfd, respectively, accounting for 5.75 percent and 6.8 percent of national lifting figures that year. However, as Pertamina has participating interest and production splits in some of those blocks, its potential extra production after the takeover will only reach around 43,812 bopd and 375.9 mmscfd.
“We will team up with strategic partners that have investment capacity to help finance our upstream expansion,” said Gigih Prakoso, Pertamina’s investment planning and risk management director.
Consolidation with PGN will also pave the way for Pertamina to strengthen its grip in the management of downstream gas in-frastructure. As of last year, PGN operated gas transmission and distribution pipelines spanning 7,435 kilometers, or 76 percent ofthe country’s overall downstream gas pipelines. Meanwhile, Pertamina, through its subsidiary Pertamina Gas (Pertagas), operated 2,085-kilometer transmission pipelines.
In its report published on Jan. 31, global energy think tank Wood Mackenzie lauded the Pertamina-PGN consolidation, particularly given their complementary gas businesses.
The group said Pertamina could leverage the PGN’s wide customer base to extend its reach and marketing, especially in finding customers for its liquefied natural gas (LNG) cargoes. The merger is also expected to provide a head start for the government’s domestic price reforms, the report said.
“The government is seeking to implement a price pooling mechanism, whereby it will blend prices from diverse supply sources. This will help soften price Huctuations to customers and also accommodate the rising use of higher priced LNG,” Wood Mackenzie said.
“Without the merger, this policy cannot be fully implemented.
the Jakarta Post, Page-13, Monday, Feb 5, 2018
“We will team up with strategic partners that have investment capacity to help finance our upstream expansion,” said Gigih Prakoso, Pertamina’s investment planning and risk management director.
Consolidation with PGN will also pave the way for Pertamina to strengthen its grip in the management of downstream gas in-frastructure. As of last year, PGN operated gas transmission and distribution pipelines spanning 7,435 kilometers, or 76 percent ofthe country’s overall downstream gas pipelines. Meanwhile, Pertamina, through its subsidiary Pertamina Gas (Pertagas), operated 2,085-kilometer transmission pipelines.
In its report published on Jan. 31, global energy think tank Wood Mackenzie lauded the Pertamina-PGN consolidation, particularly given their complementary gas businesses.
The group said Pertamina could leverage the PGN’s wide customer base to extend its reach and marketing, especially in finding customers for its liquefied natural gas (LNG) cargoes. The merger is also expected to provide a head start for the government’s domestic price reforms, the report said.
“The government is seeking to implement a price pooling mechanism, whereby it will blend prices from diverse supply sources. This will help soften price Huctuations to customers and also accommodate the rising use of higher priced LNG,” Wood Mackenzie said.
“Without the merger, this policy cannot be fully implemented.
the Jakarta Post, Page-13, Monday, Feb 5, 2018
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