Pertamina expects distribution system to help net profit

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.