Government, Pertamina eye LNG plants settlement

Government, Pertamina eye LNG plants settlement

Leony Aurora, The Jakarta Post, Jakarta

The government and Pertamina are still discussing whether
liquefied natural gas (LNG) plants will be included as part of
the state oil and gas firm's fixed assets, a top government
official says.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro
said the energy and finance ministries had reached an agreement
on the revaluation of Pertamina's fixed assets, but still left
the issue of LNG plants unsettled.

Including the LNG plants, the two ministries agreed to peg the
accumulated assets at about Rp 124.6 trillion (US$13.12 billion).

"These (assets) also included the fixed assets of Pertamina
and its subsidiaries within the country and abroad," said Purnomo
on Tuesday.

Media reports have previously stated that the finance
ministry's directorate general of taxation had pegged the fixed
assets value at Rp 126 trillion.

The government will leave all oil refineries across the
country -- which in total produce almost 1 million barrels of oil
per day -- that are currently operated by Pertamina to remain in
the state enterprise's hands.

However, whether the country's two LNG plants should be owned
by Pertamina or the Oil and Gas Upstream Regulatory Agency (BP
Migas) was not clear.

"We must calculate if they (LNG plants) will bring benefit to
the company," said Purnomo.

Indonesia has two LNG plants, namely in Bontang -- the larger
of the two -- in East Kalimantan and in Arun, Nanggroe Aceh
Darussalam.

The asset's verification is part of the process to determine
Pertamina's initial capital. The company, which used to also be a
regulator until 2002, needs to set assets and capital figures to
conduct regular corporate activities, such as securing loans or
issuing bonds.

The government will determine the actual capital value based
on the total of fixed and financial assets deducted by the
company's debts.

Pertamina's spokesman Abadi Poernomo said that the LNG plants
should remain with Pertamina, as the company was bound by
contracts with its buyers.

However, as the LNG plants have high value, the inclusion of
the plants as assets might have the undesirable effect of
lowering the company's return on assets (ROA) ratio, he added.

The government will have to form a separate company if the LNG
plants are to be placed with BP Migas, as the regulating body is
not entitled to run businesses.

Meanwhile, Purnomo reiterated that Pertamina and the finance
ministry would conclude the calculation on the government's and
Pertamina's debts to each other, specifically regarding parts of
subsidies from the past two years, within a week.

Aside from the debts, in order to secure cash flow, the
government and Pertamina will try a new scheme proposed by the
state oil firm, where the government pays only Rp 1.2 trillion
every month to Pertamina to secure fuel supply.

The government has to give Pertamina up to $1.1 billion every
month to cover fuel imports, and the company has to return, among
others, proceeds of domestic fuel sales as well as government's
share of crude oil and LNG.

"The gap is about Rp 1.2 trillion, which will be paid on the
10th (of each month)," said Purnomo.

Based on oil prices throughout the first four months of the
year, Pertamina and the government have set the oil price at $50
a barrel and an exchange rate of Rp 9,300 to the dollar for the
rest of the year -- from which the Rp 1.2 trillion figure was
set.