Pertamina sees declining revenue and profit as oil production decreases

Rendi A. Witular, The Jakarta Post, Jakarta

State oil and gas company PT Pertamina expects a decline in profit and revenue this year due to declining oil production and higher expenses for its public service obligations (PSOs).

In its 2005 business plan that was recently approved by the government, Pertamina projected a net profit of Rp 6.37 trillion (US$700 million), down from its earlier estimate of Rp 7.31 trillion.

"The decline in Pertamina's net profit is mostly attributable to a decline in its oil production and a higher cost for its PSO activities," said Roes Aryawidjaja, a deputy to the state minister of state enterprises.

The Office of the State Minister of State Enterprises oversees state-owned companies.

Roes refused to elaborate, but according to Pertamina's business plan, revenue from crude oil exports is expected to decline to Rp 487 billion this year from Rp 2.52 trillion last year.

In relation to PSO activities, replacement funds from the government to Pertamina for the processing and distribution of domestic fuel is also estimated to drop to Rp 60.13 trillion this year from Rp 71.45 trillion in 2004

The company's income from other sources of revenue is projected to decrease to Rp 4.16 trillion from Rp 8.88 trillion.

In addition, Pertamina expects revenue from fuel sales to decline slightly to Rp 79.27 trillion from Rp 80.91 trillion. Revenue from fuel exports is also expected to decline to Rp 18.45 trillion from Rp 18.76 trillion.

Overall, the company's operating revenue is projected to reach Rp 197.74 trillion this year, from an estimated Rp 213.52 trillion last year.

To help offset the declines, the Office of the State Minister of State Enterprises had urged Pertamina to boost its revenue from the sale of non-oil products for the domestic market, such as lubricants. In its business plan, Pertamina has projected revenue from non-oil sales to increase to Rp 33.69 trillion this year from Rp 29.33 trillion last year.

"To offset the decline in its oil business, Pertamina has to boost its non-oil businesses and reduce production costs so that it can improve its efficiency," said Roes.

Pertamina's performance (in billions of rupiah)

2005*** 2004*** 2003** 2002* 2001*

Operating revenue 193,579 204,524 215,257 192,731 206,346 Operating expenses 180,773 188,326 206,279 158,686 178,730 Net profit 6,378 7,313 1,130 5,975 4,477 Assets 165,982 189,053 210,017 92,980 96,891

Pertamina's indicators (in percentages)

Net profit margin 3.29% 3.58% 0.53% 3.10% 2.17% Return on equity 5.91% 6.89% 0.88% 19.28% 16.04% Return on assets 3.84% 3.87% 0.54% 6.43% 4.62%

* Audited ** Unaudited *** Projected

Source: Office of the State Minister of State Enterprises