Pertamina to invest $29b in three years

State oil and gas company PT Pertamina seeks to double its capital expenditure to Rp 262.3 trillion (about US$29 billion) during a period of 2010 to 2014 in a bid to meet its production target of 1 million barrels of oil equivalent per day (BOEPD) in the next five years.

Pertamina is upbeat about boosting its oil and gas production from the current level of approximately 420,000 BOEPD to 1 million BOEPD in 2015. The company’s president commissioner Sugiharto said the significant increase of investment was vital to meeting the goal.

“Pertamina’s combined capital expenditure from 2010 to 2014 is expected to reach Rp 262.3 trillion. This is much higher compared to the investment from 2005 to 2009, which was less than Rp 100 trillion,” Sugiharto said Monday, at a seminar on Indonesia’s energy outlook.

He added that Pertamina had the capacity to generate the huge amount of capital expenditure. “Currently, Pertamina’s leverage is only at 0.18 percent, meaning that the room to borrow and to invest is still very big,” Sugiharto said.

According to Sugiharto, Pertamina’s realized capital expenditure is estimated to reach Rp 26.2 trillion this year. The figure is expected to increase to Rp 37.1 trillion in 2011 and to further increase to Rp 74.3 trillion by 2014. Upstream investments consistently make up the majority of the total investment figures, accounting for around 50 to 76 percent.

Sugiharto said acquisition of the new blocks would contribute significantly to the total investment. “We want to grow by not only relying on the existing portfolio, but also through mergers and acquisitions,” he said.

Sugiharto added that the development and acquisition of already developed fields was expected to contribute 40 percent to the company’s production growth. The development and the acquisition of undeveloped fields was also expected to contribute to 40 percent growth. Another 20 percent growth is expected from assets exploration.

Pertamina has taken aggressive moves to acquire oil and gas assets, including a plan to acquire an indirect stake in another Indonesian energy company, PT Medco Energi Internasional, but the plan was canceled without an explanation from either company.

Sugiharto said that in the future Pertamina would focus more on acquiring upstream assets than acquiring companies’ stakes. “We want to increase our stakes in a block in Libya,” he said. Earlier, Pertamina’s president director Karen Agustiawan said the company was evaluating 30 oil and gas blocks for acquisition.

In addition to upstream projects, Pertamina also expects to invest in increasing its refineries’ capacities. Currently, Pertamina operates six refineries with a total fuel production capacity of 1.03 million barrels per day. The company is preparing several new refinery projects in a bid to meet the national fuel demand, which reaches 1.4 million barrels per day.