P

ertamina'€™s financial health improved dramatically Tuesday after the government paid back most of the US$4 billion it owed the state-owned oil and gas firm, according to a company official.

About 75 percent of the government'€™s debts had been settled, Pertamina president director Dwi Soetjipto said Wednesday.

'€œPertamina'€™s cash position is good because we have successfully asked the government to settle its debts. Not all of the receivables have been settled, but a significant amount has been paid,'€ Dwi said on the sidelines of a meeting with the House of Representatives Commission VII on Wednesday.

According to Pertamina'€™s financial report of 2014, Pertamina'€™s total receivables with government reached $3.97 billion at the end of 2014. Of the total amount, as much as $2.32 billion comprised a receivables balance for the reimbursement of a gasoline subsidy and $701.55 million for the reimbursement of the subsidy costs for 3-kilogram canisters of liquefied petroleum gas (LPG).

In addition, the government owed Pertamina $187.56 million for the reimbursement of costs for the kerosene-to-liquefied petroleum gas (LPG) conversion program and $451.75 million for marketing fees, which is related to the marketing of the government'€™s crude oil, natural gas and liquefied natural gas (LNG), based on an assessment by the Upstream Oil and Gas Regulatory Task Force (SKKMigas).

The government'€™s debts to Pertamina have been an issue, as the oil and gas company is currently struggling to finance its massive expansions amid the declining price of oil.

Late last year, the government overhauled its fuel policy by scrapping the poorly targeted Premium gasoline subsidy, although the government continues to apply a fixed subsidy for diesel fuel of Rp 1,000 per liter.

The fuel subsidy policy was lauded by observers as protecting the interests of the people. However, it is now burdening Pertamina, because fuel prices, which are adjusted by the government every month, are still below market price.

Finance Minister Bambang Brodjonegoro said earlier that the government was looking to find a win-win solution so that Pertamina wouldn'€™t become a '€œvictim'€ of the new fuel subsidy. He cited the possibility of a gradual increase in Premium prices or higher prices for non-subsidized octane-92 Pertamax to compensate for Pertamina'€™s subsidy expenses.

Pertamina reported $1.51 billion in net profit last year, about half of the $2.9 billion profit booked in 2013, as revenues dropped slightly to $70.6 billion from $71.1 billion, while income-tax expenses rose 19.3 percent to $2.3 billion, despite a slight decrease in overall expenses to $63.8 billion from $64.1 billion.

The company is currently struggling to improve its cash-flow in order to support its ambition to assume a bigger role in the country'€™s oil and gas production, largely through the acquisition of managing rights to numerous soon-to-expire oil and gas blocks.

There are currently 35 oil and gas blocks that will expire during 2015 to 2025 period.

'€œWe have the ability to operate blocks in the country, as we already have information on their subsurface conditions, geological conditions as well as social problems that may occur,'€ Pertamina upstream director Syamsu Alam said.