Petronas to invest $100m each year in downstream sector

Rendi A. Witular, The Jakarta Post, Jakarta

Malaysia's state-owned energy giant Petroliam Nasional Berhad (Petronas) plans to invest at least US$100 million a year in Indonesia to prepare and develop its oil and gas downstream business in the country.

Petronas president Tan Sri Dato Sri Mohammad Hasan Marican said that the company would boost its presence in Indonesia's downstream sector by first conducting marketing activities and then building fuel stations.

"The downstream sector is our long term target in Indonesia, but we know that it is not going to be easy... We plan to spend more than $100 million each year here to support our downstream business," said Marican in a press briefing on Sunday.

Marican arrived in Indonesia to attend the launching ceremony of Petronas' engine lubricants under the brands Syntium and Sprinta, which are expected to hold five percent of the market share in the country by 2013. Acting as the distributor here is Petronas' newly established local unit, PT Petronas Niaga Indonesia.

The launching signaled Petronas' preparations to engage in the country's downstream sector.

The downstream sector in the oil and gas business consists of crude processing activities, fuel transportation, storage and marketing, while the upstream sector consists of exploitation and exploration activities.

According to oil and gas Law No. 22/2001, which liberalizes the country's oil and gas sector, state-owned oil and gas firm Pertamina's monopoly rights in the distribution of fuel across the nation will only be allowed until November 2005.

After that, private investors, both local and foreign, can enter the downstream sector.

Marican said that this year alone, Petronas had invested up to $400 million for the upstream sector in an attempt to support its expansion in the downstream sector in 2005.

He also said that to support the plan, Petronas was currently negotiating with Pertamina to set up fuel stations.

"We have expressed our interest in the fuel station business and we have agreed to use Pertamina's products. We have already done such business in South Africa and now we want to try it here," said Marican, adding that Petronas would first try to focus its fuel station business in Sumatra and Java.

He also explained that as part of Petronas' downstream expansion in Indonesia, the company planned to supply its petroleum products refined in Serawak to Pontianak, West Kalimantan, in 2005.

Petronas has been an active player in the Indonesian oil and gas sector. Its subsidiary, Petronas Carigali Sdn Bhd, has shares in five oil and gas blocks across the nation: Ketapang, Karapan, Tanjung Aru, Jabung and West Natuna A.

The Jabung block produces about 24,000 barrels of oil per day and the West Natuna block now supplies natural gas to Singapore. The remainder of the blocks are still being explored.

Petronas is also engaged in the gas transmission business through its local subsidiary PT Transportasi Gas Indonesia, which manages and operates the Grissik-Duri and Grissik-Batam-Singapore pipelines.

Petronas has also formed a strategic partnership with Pertamina and Vietnam state-owned energy company Petrovietnam to search for oil and gas in Malaysia, Indonesia and Vietnam.

The company is among the world's 500 most profitable companies listed by the Forbes magazine. For the financial year, which ended in March, Petronas recorded a turnover of $21.4 billion, with a pre-tax profit of $7.1 billion.