Pertamina sheds corrupt practices, earns billions

Riyadi Suparno, The Jakarta Post, Jakarta

Once a symbol of corruption, state oil firm Pertamina has embarked on an internal reform program under new leadership and has reaped billions of dollars in investments to double its oil and gas output.

Speaking to the media here Thursday, Pertamina President Ari H. Soemarno acknowledged that his company used to be a cash cow for those with political connections, but he insisted those days were over.

"As someone who has been working in Pertamina for years, I'm also responsible for those poor practices in the past. But now, I'm also determined to transform Pertamina into a competitive, modern and respected company," Ari said.

He said he had launched the internal transformation through 27 "breakthrough projects", including reducing the rampant leakage of fuels during transportation, increasing efficiency at the company's many ports and ridding its fuel depots of white collar thugs and thieves.

Within their first three months, he said, these projects had brought in an additional US$15 million.

The company has also worked to revamp its gas stations to better serve costumers.

"With the arrival of Shell and Petronas in the market, we have to improve the look and management of our gas stations. If Shell and Petronas have convenient stores and beautiful female attendants to serve customers, while our gas stations are manned by people with dirty clothes, how can we compete with them?" Ari said.

Pertamina will also work with multinational oil and gas companies to enhance its downstream businesses; for example, it will partner with SK Corp to build a lubrication oil plant in Dumai, Riau, and team up with Shell in the aviation fuel sector.

Ari said the company plans to more than triple its investment in the downstream sector to Rp 3.7 trillion (US$410 million) this year from Rp 960 billion last year and Rp 1.3 trillion in 2005.

He added that Pertamina would deepen its involvement in the upstream sector as well, which he said promised bigger returns.

"The upstream is our value creator, while the downstream is our value enhancer. So we have to be strong in both," he said.

In the upstream sector, Ari said Pertamina would invest a hefty Rp 10.1 trillion this year, a jump from Rp 3.5 trillion last year and Rp 3.9 trillion in 2005.

With that high investment in the upstream sector, Pertamina aims to double its oil and gas output from its current level of 235,000 barrels of oil equivalent per day within the next four years.

"So our total investment plan for this year would be about Rp 14 trillion (US$1.5 billion). That's still small, compared to our friends overseas. Petronas, for example, invests about $5 billion a year," Ari said.

He noted that most of the money for investment this year would be taken from retained earnings. Last year, Pertamina booked a profit of Rp 21 trillion. About Rp 12 trillion of that will be paid as shareholder dividends to the government, and the remainder retained.

This year, Pertamina, with total assets of around Rp 360 trillion, aims to book a net profit of Rp 23 trillion.

Pertamina's books have not been thoroughly reported on since the company's corporatization a few years ago. A government-ordered Ernst and Young audit is still in progress.