Amid Soaring World Oil Prices, Pertamina Successfully Efficiency Up To 2 Billion US Dollars

Pertamina Head Office in Jakarta, Indonesia. (Photo: ANTARA)

JAKARTA - In the midst of the challenges of soaring crude oil prices, PT Pertamina (Persero) is strengthening its financial strategy and operational efforts to improve efficiency in all business lines, both holding and subholding, from upstream, processing to downstream.

From this business strategy, during 2021 Pertamina succeeded in optimizing costs of 2.21 billion US dollars, which was obtained from a cost saving program of 1.36 billion US dollars, cost avoidance of 356 million US dollars and additional revenue (revenue growth) of about 495 million US dollars.

Pertamina's Finance Director, Emma Sri Martini, explained that Pertamina has developed various policies and business strategies from both a financial and operational perspective as an effort to face the challenges of world oil prices which have soared significantly.

From a financial perspective, Pertamina implements a cost optimization program throughout the Pertamina Group which includes cost savings, cost avoidance, and increased revenue.

Parallel to the austerity efforts, Pertamina also runs a hegding program for market risk management.

In addition, the company also centralizes procurement, prioritizes capital expenditures and manages assets and liabilities to reduce costs or interest expenses (cost of funds).

"We are trying to optimize all costs and manage the company's financial aspects, in order to reduce costs, including prioritizing projects that have fast results," he told the media, Monday, June 20.

Apart from tightening finances, according to Emma, Pertamina is also implementing an operational strategy in order to increase revenue, which is mostly run by its subsidiaries, namely six subholdings.

In the upstream business, Pertamina continues to increase oil and gas production and lifting to take advantage of the momentum of rising oil prices.

As a result, production rose 4 percent and lifting 3 percent.

Emma said the positive performance from the upstream operations was contributed by the Rokan Block and foreign assets as well as consistent efforts to maintain production levels through well drilling and resource discovery.

Throughout 2021, Pertamina has drilled 12 exploration wells and 350 exploitation wells.

In the same year, discovered reserves (2C) reached 486.70 MMBOE, and additional proven reserves (P1) reached 623.47 MMBOE.

In processing and petrochemicals, in 2021 Pertamina will implement a crude and product optimization strategy.

This has contributed to an increase in product yield of value by around 3 percent.

The strategy is related to the selection and economical substitution of crude oil, and maximizing high valuable products with high spreads.

On the other hand, refinery production also increased in response to higher energy demand due to the national economic recovery.

Then in the transportation and logistics lines, Pertamina optimizes the load factor to achieve revenue and cost efficiency.

On the gas business side, Pertamina has also increased the volume of trade and gas transportation as well as the volume of oil transportation.

"And after the legal end state, we also intensify resource sharing, such as sharing facilities and sharing development agreements, especially in upstream sub-holding," added Emma.

Emma added, positive performance downstream was also supported by the government through the recognition of the difference in compensation for HJE JBT Solar and JBKP Pertalite in 2021, reaching around USD 4 billion Ekv IDR 58.6 trillion (excluding tax) and payments for 2018 and 2019 compensation of around 1 .7 billion US dollars Ekv. IDR 24.1 trillion (excluding tax).

According to Emma, the government's support will continue in 2022 through a policy revision that stipulates Pertalite (RON90) as a Special Assignment Fuel to replace Premium (RON88) and an adjustment to the price of Pertamax.

As a form of Pertamina's appreciation for this support, several initiatives in the downstream sector have been implemented, which simultaneously respond to market changes such as expansion of digital transactions, accelerating Pertashop outlets to capture larger market opportunities in rural areas, and diverting gas station energy sources to solar panels.

"We really appreciate the decision of the Government and the DPR which has increased the budget ceiling for subsidies and compensation for 2022 to maintain and protect people's purchasing power and contain potential inflation. This is also proof of support for Pertamina in providing energy amidst the challenges of high crude oil prices," Emma added.