Pertamina to double profit this year

JAKARTA (JP): State oil and gas company Pertamina said on Monday it expected to double its consolidated net profit this year to Rp 6.9 trillion (US$873 million) from Rp 3 trillion last year as a result of better operational efficiency.

Pertamina President Baihaki Hakim said that even though revenue would drop to Rp 64 trillion from last year's Rp 79 trillion, the company would still be able to outdo last year's net profit.

"Production costs have dropped in line with the company's current restructuring process," he said in a news conference.

Pertamina's restructuring program aims at wiping out inefficiencies that have plagued the giant state company for years.

An audit by PriceWaterhouseCoopers of Pertamina for the period from April 1996 to March 1998 found inefficient practices and losses of income opportunities amounting to some $4.69 billion.

This year, however, Pertamina predicted its expenditure to decline to Rp 57 trillion from Rp 76 trillion last year.

Pertamina's crude oil production costs for the 1999/2000 period have dropped to $3.65 per barrel from $3.86 in 1998/1999, while the costs of producing gas dropped to 30 U.S. cents per million cubic feet from 40 cents.

Baihaki said the cheaper production costs were a result of simplifying working procedures.

Last year Pertamina booked a consolidated net profit of only Rp 1 trillion for the period from April 1998 to March 1999.

The company's consolidated assets, including that of its six subsidiaries, rose by Rp 5 trillion to Rp 69.4 trillion during the year.

Pertamina's own production units made a net profit of Rp 821 billion in 1998/1999, against Rp 198 billion a year earlier.

Although its crude output remains constant, Pertamina managed to book higher revenues that year due to the sharp depreciation of the rupiah against the U.S. dollar.

The six Pertamina subsidiaries are PT Elnusa (electronics), PT Patra Jasa (hotels and restaurants), PT Pelita Air Services (air transportation), PT Patra Dok Dumai (shipping docks), PT Tugu Pratama (oil and gas insurance) and PT Pertamina Tongkang (small vessels provider).

Aside from placing the internal restructuring program as its priority, Pertamina also aims to restructure regulations of the oil and gas sector, which according to Pertamina are inhibiting its growth.

Baihaki said that Pertamina was bound by law to transfer all its earnings to the government, which would replace Pertamina's costs and pay the company fees in turn.

"So don't compare us with Petronas," he said referring to the Malaysian state oil and gas company whose management once learned from Pertamina.

Baihaki noted that reforming the oil and gas regulations and the company's human resources and organization were key to seeing Pertamina become a world class company. (bkm)