Pertamina to spend $1 billion to boost production this year

Ika Krismantari, The Jakarta Post, Jakarta

State oil and gas company PT Pertamina will invest up to US$1 billion this year to increase crude oil production by more than 50 percent and natural gas production by approximately 70 percent by 2009.

Pertamina president director Ari H. Soemarno said during a hearing with House of Representative's members Monday that under the expansion plan, the company's oil production was expected to increase by 70,640 barrels per day, or 53 percent, by the end of 1999. The company's gas production is expected to increase by 792 million cubic feet per day, or 70 percent, by the end of 2009, he said.

Ari said that the investment will be used to develop its 170 existing wells and to drill new wells including at the Cepu block in East Java.

The Cepu oil block, which is operated in conjunction with ExxonMobil Oil, is expected to start production by the end of 2008.

The company will also strengthen cooperation with strategic partners in an effort to boost oil and gas production, particularly in the development of high-cost oil and gas fields in frontier areas, which are mostly located in the eastern part of the country, Ari said.

Earlier this month, the company and partner Norwegian oil firm Statoil won the rights to develop an oil and gas block at Karama in the Makassar Strait.

Using Statoil technology, the companies have allocated up to $75 million to finance exploration activities in the block, which is predicted to hold potential oil reserves of 200 million barrels. Statoil holds a 51 percent stake in the endeavor, while Pertamina has a 39 percent stake.

Pertamina is also planning to spend $135 million to develop the Coastal Plains and Pekanbaru (CPP) block in Riau with partner PT Bumi Siak Pusako (BSP) to increase production to 30,000 barrels per day this year from 27,000 last year, general manager for the joint operation Aulia said.

Ari said that Pertamina is also planning to establish a joint venture with Japanese construction company Mitsui to develop its refinery in Cilacap, Central Java, with an estimated investment of between $1.5 billion and $1.7 billion.

Ari said that the refinery was expected to start operations in 2011.

Pertamina finance director Frederick Siahaan said, as quoted by Bloomberg, that the company's net income increased by 15.6 percent to Rp 19 trillion (approximately $2 billion) in 2006 from Rp 16.46 trillion the previous year, below the company's projected target of Rp 21 trillion.

With a surge in crude oil prices, the company expects its profit to increase by about 10 percent to Rp 23 trillion this year.