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Jakarta Post

Pertamina has high hopes for renegotiations with Saudi Aramco, Rosneft

  • Viriya P. Singgih

    The Jakarta Post

Jakarta   /   Thu, June 15, 2017   /   12:56 pm
Pertamina has high hopes for renegotiations with Saudi Aramco, Rosneft Pertamina president director Elia Massa Manik (center) speaks to journalists in Jakarta on May 24 about the company's performance in the first quarter of 2017. (Antara/Puspa Perwitasari)

State-owned energy firm Pertamina has stated that it could reduce some of its financial burden should renegotiations go well with Saudi Arabia oil giant Saudi Aramco and Russia's Rosneft Oil Company for the development of two major refinery projects.

Pertamina has signed a joint venture agreement with Aramco for the Cilacap refinery upgrade with a total investment value of around US$5.8 billion. Meanwhile, Pertamina will also team up with Rosneft to develop the new Tuban refinery, projected to cost $15 billion. Both projects are located in East Java.

Pertamina has a majority 55 percent stake in both projects.

Due to negative operating cash flow, Pertamina has tried to renegotiate with Aramco and Rosneft, asking them to conduct joint marketing efforts instead of making Pertamina the sole off-taker for oil produced at the refineries. That way, the off-take agreement will be in line with the shares portion of each party involved.

“Yes, this could [reduce our burden] because the problem is in the off-take agreement,” Pertamina president director Elia Massa Manik said in Jakarta on Wednesday.

Meanwhile, Fitch Group’s BMI Research has estimated that Indonesia will continue to remain the largest net importer of refined fuels in Asia following financial constraints faced by Pertamina.

“We note that failure to secure joint-venture partners to share the cost burden will exert a significant drag on the firm's finances for years to come,” BMI Research stated. (bbn)