Tue, 23 Dec 2008
Alfian, The Jakarta Post, Bandung

State oil and gas company PT Pertamina plans to spend around Rp 11 trillion (US$1 billion) on upgrading its upstream facilities as part of an effort to boost output, the company's upstream director, Karen Agustiawan, says.

The company expects to see a 7 percent rise in oil output next year to 171,250 barrels of oil per day (bopd) up from an estimated 159,000 bopd in the previous year.

Karen said some 6 trillion (US$541.76 million) of planned expenditure would go to PT Pertamina EP, the subsidiary which produces and sells oil and gas.

"Of the total Rp 11 trillion investment for upstream we have planned for 2009, nearly Rp 6 trillion will go to PT Pertamina EP," Karen said on Saturday.

Karen said that Pertamina's upstream investment target this year would also be close to Rp 11 trillion, but only 70 percent of it would be realized by the end of the year.

Pertamina's oil and gas production has been derived from two of its upstream subsidiaries -- Pertamina EP and PT Pertamina Hulu Energi. Pertamina Hulu manages and develops oil and gas upstream portfolios through partnership schemes.

Nearly 80 percent of Pertamina's total oil output is from Pertamina EP.

Due to liquidity shortages in the past, Pertamina could not invest much in upgrading Pertamina EP facilities.

Karen said the planned investment for Pertamina EP would be spent to upgrade production assets in the Limau oil fields in South Sumatra and Tambun gas fields in Bekasi, West Java.

"The two fields are the backbone of Pertamina EP, and they will become pilot projects (for facility upgrading)," she said.

Karen did not specify what facilities would be added.

Of this year's targeted oil output, 125,000 bopd will be from Pertamina EP while the remaining 34,000 bopd will come from Pertamina Hulu.

Karen said Pertamina Hulu had managed to meet its target, while Pertamina EP could only produce 119,000 bopd due to a major overhaul of its facilities in March and May.

Pertamina has targeted to produce 171,250 bopd next year. From this target, Pertamina EP is expected to contribute 132,250 bopd and Pertamina Hulu 39,000 bopd.

Karen said Pertamina EP was expected to gain a quite significant additional output next year because it would receive 6,750 bopd from its new oil block in Cepu.

However, she believed the 2009 target was a moderate one.

"I don't want to create expectations that would be too high. We are keeping to modest targets while we are upgrading our facilities," she said.

Meanwhile, crude oil prices on the New York Mercantile Exchange have fallen 77 percent from a record US$147.27 a barrel on July 11 to US$33.87 a barrel on Friday, Bloomberg reported.

In response to the price decline, Karen said Pertamina would not revise downward next year's target as the company was responsible for meeting domestic oil needs.

Karen added oil production costs in Indonesia were still lower than the current oil prices.

"The production cost is only about US$10 per barrel in Java and between $8 and $9 in other areas," she said.

Pertamina is also to continue with its plan to acquire stakes in other oil and gas blocks.

The company has repeatedly said it plans to secure bigger shares in several blocks, including the West Madura block in East Java, Total's Mahakam block in East Kalimantan, and Chevron's deep-water fields off East Kalimantan.

Pertamina has also sent official requests to obtain a higher stake in Inpex's Masela offshore block in the Timor Sea.

"We hope we can get 30 percent (of a stake in the block)," Pertamina's president director Ari Soemarno said Friday.

Pertamina is also in talks with Verenex Energy Inc. to buy the Canada-based firm's stakes in an oil field in the Ghadames Basin in Libya.

Karen believed now was the right time for Pertamina to expand its oil and gas fields.

"I think this is the right time for shopping, because all the prices have dropped in alignment with declining oil prices," she said.



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