If Premium Is Removed, How Will Pertamina's Performance?

Pertamina Building. (Irfan Meidianto / VOI)

JAKARTA - Plans to eliminate Premium types of fuel (BBM) reappear before the turn of the year. The trigger was a statement from the Director General of Pollution and Environmental Damage Control at the Ministry of Environment (KLHK) Karliansyah.

On Friday, November 13, in a discussion held by the Indonesian Consumers Foundation (YLKI), Karliansyah said that Premium fuel in Java, Madura and Bali (Jamali) would be removed. This regulation is planned to take effect on January 1, 2021.

"Thank God, last Monday I met with the Operations Director of Pertamina, he said that as of January 1, 2021 Premium in Jamali in particular will be eliminated," said Karliansyah, in a virtual discussion, Friday, November 13.

However, Karliansyah's statement still needs to be accounted for. This is because the Ministry of Energy and Mineral Resources (ESDM), as the policy maker on BBM, has not dared to justify this discourse.

The Head of Preparation and Implementation of Upstream Oil and Gas Standardization at the Ministry of Energy and Mineral Resources, Ilham Rakhman, said that his party needs to wait for a decision at the cabinet level first.

"There must be a meeting of the new cabinet we can convey (to the public), because we have to be careful," he said, in an online seminar, Wednesday, November 18.

Meanwhile, Pertamina's Vice President for Promotion & Marketing Communication, Arifun Dhalia, said Pertamina was only a vendor or executor of government duties. The sale of Premium gasoline was carried out by Pertamina because it received an assignment from the government.

Arifun said that the termination of the assignment's fuel distribution policy could only be done through a Presidential Regulation (Perpres). This means that only President Joko Widodo (Jokowi) can eliminate Premium gasoline.

The state-owned company admitted that until now it had not discussed the elimination of Premium fuel at all. This is because the government has not yet conveyed a formal appeal.

"Pertamina is very obedient to the government as a regulator that Premium must be provided. The Perpres must be issued first. Then we will execute it. For Premium it must be a Presidential Decree," he said.

Pertamina's performance

If you look at the company's financial statements, currently, the contribution of Premium gasoline to overall company revenue is around 11 percent. So, what will the impact on Pertamina's performance if Premium is removed?

In fact, the largest portion was contributed by the sales of Pertamax, Pertamax Turbo, Pertalite, and Pertadex. Last year, this group contributed 25.74 percent or slightly above 2018, which touched 25.06 percent.

Meanwhile, diesel oil was 24.01 percent and LPG, petrochemicals, lubricants, and others with 18.72 percent. Premium gasoline is in fourth position.

However, even though the figure seems insignificant, even the slightest loss of revenue will affect Pertamina's performance. Moreover, the COVID-19 pandemic crisis is pressing these SOEs.

In 2019, oil prices began to show a downward trend. This caused Pertamina's performance over the past year to fade. Until now, world oil prices have not been able to get out of the range of US $ 40 per barrel and projections for next year are still unclear.

Premium type of fuel. (Photo: Pertamina)

Pertamina's revenue in 2019, was recorded to have decreased by 3.35 billion US dollars to 54.58 US dollars worth, compared to the realization throughout 2018, which reached 57.93 billion US dollars. One of the factors contributing to this condition is the decline in sales of crude oil, natural gas, geothermal energy and oil products.

Then, sales of the oil and gas company's superior products were 2.14 percent lower to US $ 43.78 billion compared to 2018, which was valued at US $ 44.74 billion. As a result of declining sales, Pertamina's net profit was also stagnant compared to the previous year, namely US $ 2.53 billion.

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In the first semester of this year, Pertamina suffered a loss for the year attributable to the parent entity amounting to US $ 767.91 million. This figure is in contrast to the achievements in the first semester of 2019, when Pertamina was recorded as still able to gain a net profit of up to 659.95 million US dollars.

Not only that, this state-owned company also experienced a decline in revenue to US $ 20.48 billion, down from a score of US $ 25.46 billion in the first semester of 2019. This record has a huge potential to disrupt Pertamina's large contribution to the country, amidst the spotlight. dividends that have tended to stagnate in recent years.

Meanwhile, the Ministry of BUMN regrets this situation. Deputy Minister of BUMN Kartika Wirjoatmodjo said that the performance of energy BUMNs was at its lowest point.

"In the BUMN portfolio, the one most affected by Covid-19 is energy. There has been a decrease in fuel and electricity consumption. It is very pronounced," he said in an online conference, Tuesday, October 20.

However, he said, on the one hand, the elimination of Premium does have positive implications for the environment and state finances. This is because the government has also disbursed significant funds to realize subsidies for the sale of energy needs, including fuel, to the public.

In 2021, the government has budgeted Rp. 54.4 trillion for subsidies for fuel and LPG. Assuming Premium is removed, this budget will certainly shrink. However, on the other hand, the government needs mitigation. Especially, to anticipate if the dividends that Pertamina can generate are running low.

Premium Is Already Rare

From year to year, Pertamina continues to cut its Premium sales quota gradually. President Director of PT Pertamina Patra Niaga Mas'ud Khamid said that currently premium sales are around 23,000 kiloliters (kl) per day. He conveyed this at the Hearing Meeting (RDP) with Commission VII DPR on Monday, October 5,

This figure is shrinking when compared to Premium sales which were around 30,000 kl per day in January 2019. In fact, it is still much lower when compared to sales of non-subsidized fuel, aka Pertamax. Per day, Pertamax sells around 10,000 kl.

"(On) September 2020, Premium is only 23,000 kl, while Pertamax is at 10,600-10,700 kl per day," he said.

Mas'ud estimates that in 2024, the sales portion of Pertamax, which is predicted to replace Premium, can dominate. To be precise, up to 3 times the Premium.

Furthermore, he said his company was currently pocketing data on areas with high purchasing power but still had a large dependence on Premium. But unfortunately, he did not reveal which areas he meant, but said that his party was eyeing another reduction in Premium sales in those areas.

If the transition plan is accelerated by removing the Premium in the new year, then the effect will be considered bad. According to observers, the government and Pertamina should have postponed the discourse on the total elimination of Premium fuel in the midst of a crisis.

The reason is, it is feared that this move will actually make the middle class vulnerable to poverty and increasingly squeezed in the midst of the pressure of the COVID-19 pandemic.

Indeed, this has been a long and systematic intention. And the fact is, Premium is already hard to find in gas stations, especially Java, Madura and Bali.

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