Norman Harsono, Jakarta – State-owned oil company Pertamina closed 2019 with a net profit of US$2.1 billion (Rp 28.8 trillion), down 16 percent from $2.5 billion the previous year on the back of weakening commodity prices.
Pertamina investment and risk management director Heru Setiawan attributed the lower profit margin to a 9.5 percent year-on-year (yoy) dip in revenue to $52.4 billion last year.
The drop in revenue corresponds with that of benchmark Indonesian Crude Prices, which fell 7.8 percent to $62.3 per barrel over the same period, hurting the profit margin even though fuel distributions were unchanged at 70 million kiloliters.
"Right now, the largest contributor to Pertamina's revenue is the downstream business but to its profit margin is the upstream business," he said at a House of Representative hearing in Jakarta on Monday.
The company's downstream activity mainly consists of fuel retail and gas distribution, following its acquisition of state-owned gas distributor PGN. Its upstream activity includes oil and gas production and refining.
Pertamina's oil and gas production also slipped last year. The company's production rate was 906 million barrels of oil per day (mboepd) in 2019, down 1.63 percent yoy.
Pertamina upstream director Dharmawan Samsu told reporters that last year's low production was caused by delayed work in the Nunukan Block in North Kalimantan, compressor facility issues in Algeria and generally underperforming oil and gas wells.
"Those are the three main factors. Another 19 percent of the shortfall was due to unrealized absorption in South Sumatra and in Bontang," he said, referring to the Bontang liquefied natural gas (LNG) facility in East Kalimantan.
However, the state-owned enterprises' geothermal production – through subsidiary Pertamina Geothermal Energy (PGE) – increased 2.1 percent yoy to 4,271 Gigawatt hour (Gwh). PGE is Pertamina's spearhead toward diversifying into renewable energy power generation.
Pertamina aims to book $2.2 billion net profit this year, up almost 5 percent from last year, and to increase oil and gas production by nearly 2 percent to 923,000 bpd.
Pertamina will start operating one of Indonesia's most productive oil blocks Rokan in Riau in 2021, taking over from the United States' Chevron. In 2018, the company began operations in Indonesia's giant oil and gas block Mahakam, taking over from French Total E&P and Japan's Inpex.
"With lessons learned from Mahakam we must make extra effort to enter the Rokan block early to avoid production decline during the transition period," Pertamina president director Nicke Widyawati told a House hearing with Commission VII, which oversees energy and mining in November.
During the transition period, Mahakam's ready-to-sell production averaged 31,053 barrels of oil per day (bopd) and 969 million standard cubic feet per day (mmscfd) of gas throughout January 2018. That's below the original targets of 48,271 bopd and 1,110 mmscfd as stated in Pertamina's 2018 work program and budget.
In 2017, the Mahakam block produced 52,000 bopd of oil and 1,255 mmscfd of gas, respectively, accounting for 6 percent and 20 percent of Indonesia's oil and gas lifting that year.
"Normally, the preceding operator does not have any intention to invest early in the transition stage."
The Upstream Oil and Gas Regulatory Taskforce (SKKMigas) has estimated that while Rokan block is under transition, production will go down to a projected 161,000 bopd next year. Rokan block is the country's second-most productive oil block, having produced around 190,000 bopd in 2019.
As for selling price, the government has projected that ICP will remain stagnant or lower this year at $58 to $63 per barrel. Targets for ready-to-sell production, or oil and gas lifting, has been maintained at 775,000 bopd and 6,670 mmscfd this year, compared with 775,000 bopd and 7,000 mmscfd last year, according to SKK Migas.