Pertamina expects distribution system to help net profit
Leony Aurora, The Jakarta Post, Jakarta
State oil and gas firm PT Pertamina expects to see its net profit double next year to Rp 22.4 trillion (US$2.23 billion) as a new system of fuel distribution will come into effect and the company's monopoly in the sector will official end on Nov. 23.
Pertamina will be able to reap more profits as the government pays for subsidized fuel according to the Mid Oil Platts Singapore (MOPS) price, plus a premium, as compared to the cost and fee mechanism applied currently, Pertamina's finance director Alfred Rohimone said on Wednesday.
"The most drastic increase (of net profit) comes from the PSO," said Alfred, referring to the public service obligation to distribute fuel across the archipelago.
Pertamina will get an estimated Rp 1.2 trillion this year as fees for conducting PSO from Rp 11.3 trillion of net earnings. Next year, the downstream retail sector will multiply tenfold and contribute some Rp 10 trillion to the company's net profit, said Alfred.
Currently Pertamina receives 40 U.S. cents for every barrel of fuel products processed in its refineries and distributed through its network, which translates to Rp 10 per liter of fuel after taxes.
Although the downstream sector monopoly officially ended on Nov. 23, the government will retain the current mechanism until the end of the year and put the new one in motion on Jan. 1, 2006.
The state firm, however, will likely be appointed to conduct PSO for another year as the new retail players, such as Royal Dutch Shell and Malaysia's Petronas, are deemed not ready to take part in the tender as they have not built any pump stations outside Java.
The government has regulated that any company that wants to distribute subsidized fuel in Java must also bring fuel to more remote areas outside the densely-populated island. It has not determined the premium to be applied in the new PSO system.
Pertamina has requested that the government pay 15 percent above the MOPS to cover transportation and distribution expenses, as well as a profit margin.
"We will offer lower than what the competitors are asking for PSO," said Pertamina's president director Widya Purnama. "It'll surely (give) better (profit margin) than Rp 10 per liter."
To face the new competitive environment, Pertamina plans to build some 200 pump stations next year, said Widya. At present, the company owns only a very few of the 2,600 gasoline stations operating across the country.
Pertamina plans to invest Rp 6.3 trillion next year, of which Rp 3.7 trillion will go to its exploration and oil production activities under its subsidiary Pertamina E&P, and the rest for its downstream businesses.
Alfred said on Aug. 19 that Pertamina would see a decline of 5 percent in its unaudited net profit this year to Rp 8.55 trillion from Rp 8.98 trillion recorded last year on higher taxes.
At the meeting on Wednesday, however, he said the estimate of Rp 11.3 trillion for this year would likely be attained.
Pertamina has to give 60 percent of the revenue it receives from selling oil and gas to the government.