Pertamina May Be Ready for Share Sale by End of 2008

By Arijit Ghosh and Wahyudi Soeriaatmadja

Jan. 26 (Bloomberg) -- PT Pertamina, Indonesia's state oil company, said it may be ready for an initial public offering by the end of 2008 after weeding out corruption and improving accounting procedures.

The company would have a market value of $30 billion, making it the biggest stock on the Jakarta Stock Exchange, company President Ari Soemarno told reporters yesterday. Pertamina hired McKinsey & Co. to improve corporate governance and tapped Schlumberger Ltd., the world's largest oilfield- services provider, to evaluate exploration capabilities, he said.

``Investor appetite would obviously be great as Pertamina still holds monopoly rights,'' said Andi Nugroho, who helps manage $22 million of bonds and stocks at PT Cipta Dana Asset Management as investment director in Jakarta. ``The question is how the management is willing to commit to transparency, a weak area that state-controlled companies typically have.''

Pertamina's market value may exceed PT Telekomunikasi Indonesia's 193.5 trillion rupiah ($21 billion) as of today. The oil company wants to raise money to fund its oil and gas exploration and reverse a drop in output.

Pertamina, which plans to double output in the next four years, forecasts $40 billion of revenue this year.

A share sale has to be decided and approved by the Indonesian government, Soemarno said.

The government, which runs 141 companies, will keep its stake in 50 of them in sectors such as energy, transportation and telecommunications, and sell part of its holdings in the rest, Indonesia's Vice President Jusuf Kalla said in an interview in November.

Preparation Time

The Indonesian government in 2003 had planned to sell part of its stake in Pertamina by 2006. The company at that time said it needed more time to prepare for the sale.

``Before an IPO our accounting, financial and corporate governance system has to be proper,'' Soemarno said yesterday. ``We want a transparent system that will create value for the company.''

Pertamina asked the government to reduce the amount of dividend taken from the company because the oil producer wants the proceeds to fund exploration, Soemarno said. Last year Pertamina paid about 45 percent of its profit to the government.

The oil producer expects net income to rise 10 percent to 23 trillion rupiah this year, Soemarno said yesterday.

Joint Ventures

Pertamina, which was formed by the merger of three state oil companies in 1968, is planning to partner with companies such as Norway's Statoil ASA in $18 billion of projects to boost production and fuel refining.

Indonesia, Southeast Asia's only Organization of Petroleum Exporting Countries member, needs to use new technology to extract more oil and gas from its aging fields and raise production after a decade-long decline in output. The government wants to find new reserves in untapped areas, mostly in deep seas and the eastern part of Indonesia.

Pertamina and Statoil are bidding for a deep-sea license in the Makassar Straits, part of 20 drilling areas offered this year by the Indonesian government, Soemarno said.

Indonesia pumped 855,000 barrels of oil a day in December, according to Bloomberg estimates. That's the lowest production among OPEC members after Qatar's 800,000 barrels a day.

To contact the reporters on this story: Arijit Ghosh in Jakarta at aghosh@bloomberg.net ; Wahyudi Soeriaatmadja in Jakarta at wahyudi@bloomberg.net .