INTERVIEW: Pertamina unveils strategy to maintain domination in fuel market (Part III)
Wednesday, May 26 2010 - 02:50 AM WIB
Can we now turn to shipping?
Pertamina operates 160 tanker ships?small, medium, and big ones--for transporting BBM, LPG, and for general purposes. Of the total 160 tanker ships, 35 ships are owned by Pertamina and are already old with their ages averaging at above 20 years. That is why, currently, we are trying to buy new ships. Recently, we bought two ships from China and South Korea. Both of them are of 23,000 DWT type and have been operated to transport LPG
How much did you spend for this?
We have been provided with a total capital expenditure for buying ships of about Rp 3 trillion (US$=Rp 9,280). That is for buying ships to distribute BBM and LPG. Every year from now (2010) until 2014 we?ll get new ships. Separately, we?ll also buy small type ships?ranging from 15,000 DWT to 17,000 DWT?from local makers. We?ll tender this small ship procurement. All of the small ones will be for general purpose.
Didn?t you say that you?ll reduce the use of small ships?
Not the small ones. The ships we reduce are the big ones. For example, to serve Surabaya we use MR tankers, with a dead weight of 30,000 tons. To Semarang we use ships with a dead weight of 17,000. Those small ones will be used to serve inter island distribution. Our fuel depots total 104, of which only 12 are big, while the rest are of small capacity. We still need the small tanker ships to serve distribution among the small capacity storages.
What about Bau-bau?
Currently, only big ones serve Balikpapan to Bau-bau. That?s GP tankers. Then from Bau-bau to Makassar we need the small ones. So, there will be no reduction of small ships.
The 3 trillion investment will be until 2014?
Yes that?s true.
Until 2014, how many ships do you expect to buy?
Look, we want to control about 30 percent of all the fleet we operate. If we assume that the fleet consists of 160 ships, is there an increase if we only have 35 as we have now? I don?t think so.
Approximately, you?re trying to get 50 more. What are their tonnages?
Let me put it this way. The shipping company that got contract of cooperation with Pertamina has now 93 vessels. But we won?t blame our predecessors for this. We have to acknowledge that it?s difficult to get money.
Why only target 30 percent. Why not 70 percent or even 100 percent?
Look, that is only a theory. Based on the theory that controlling 30 percent will be safe for us. Again, that?s only a theory. Right or not, let?s wait and see. But usually that?s the common practice of the world businesses. For example, gas stations. We?ll control 30 percent of all gas stations across the country.
With regards LPG, when will Pertamina be able to mix LPG with gas?
We have to study first about the efficiency of the raw materials, coal or gas. If we look at PLN, they prefer to use gas than coal, because apparently it is not easy to get the needed coal.
What is the progress of Pertamina?s lubricant business?
Our target of sale volume is about 400,000 kiloliters this year. We targeted to control a market share of 60 percent, but in reality we?ve surpassed that target.
Have you felt comfortable with that figure?
Beside that, we also have exported nearly 100,000 kiloliters. Even we?ve penetrated the Japanese market since two months ago.
Currently, how many countries are already your export destinations for lubricant?
In Australia , we managed to penetrate two cities, Melbourne and Sydney. In the Middle East, we?ve entered Dubai and its surrounding areas. We are also present in Pakistan , Vietnam and some other countries. All are in big sales, despite that our lubricants are not branded.
Of the 100,000 kiloliter you mentioned, how many are not branded?
About 40 percent
Is the brand of the exported lubricant the same with that you sell at local market?
There are some which have the same brand for local and export markets. The lubricant we export to Pakistan has the same brand with that we produce with a South Korean company, that is STX. The others use Pertamina?s brand Fastron. Now, we?re targeting China?s market. To get into the industries and maritime, you have to get approval from engine makers. When you get that then consumers will no longer doubt your brand. But that?s not easy.
I remember previously when we try to sell to engine makers, they are very selective. The process could take years. If they?re happy, for example our product is more efficient, then they will accept.
So, if there is a new lubricant plant, its products won?t be right away accepted by the consumers. It?s different with automotive. Soon after we get certification from API and SAE, everything settled. But with big consumers like Toyota, we have to get certification from the company.
Is it a really long process?
Yes it is. That is why we have to have a determination. Our staff members with lubricant division have already got an award from Astra (automotive distributor PT Astra International). We?re considered as a good partner. That?s really an extraordinary achievement.
And the market is truly open right now?
Widely open. Therefore, we have to be patient. Previously, Pertamina?s board of directors got angry every day. At that time I said that we?ve just started development, we haven?t yet had the certificate OEM. No people bought it as a result. And we don?t dare to be persistent, for example, by requiring all of our ships use it. It won?t succeed. Who can guarantee it? We need certification. When it gets certified then our problem will be only a matter of services and prices.
Now, not many lubricant producers have their own raw materials. Even many of them have stopped operations. That?s why I told our lubricant division that we have a big opportunity. Now it?s the time.
The lubricant that is exported to Pakistan, is it produced in Dumai plant?
Right
Is there any cooperation to be modeled with that in the future?
We started entering a country without directly having our own brand. That?s just normal. But later after that, we?ve got our network, so that we can promote our brand one by one.
So, currently what is the annual capacity of Pertamina? lubricant production?
Now we have four plants. In Surabaya we have two plants. Previously, we had planned to close down the oldest plant in the city. But then sales increased and we decided to continue it. The other two plants are in Jakarta and in Cilacap. We?ll only close down the oldest plant in Surabaya after completing the renovation of our plant in Jakarta .
Total capacity?
About 200,000 kiloliter per shift. We operate in three shifts on average. But it depends on the market. We?ll close down the oldest plant in Surabaya when the plant in Jakarta has been modernized like the one in Gresik. Many works in the old plant have to be done manually. Hopefully, we can complete the renovation of Jakarta plant in the middle of next year. Then the old plant in Surabaya will be optimized as an LPG plant.
When all of those are completed, what will be Pertamina?s capacity of lubricant?
It can be 300,000 kiloliters per shift. And then we can also produce other companies? lubricants under their own brands. Initially, this kind of scheme had been implemented, but there was an opposition to this idea. They said: ?Why should we help them survive??. In that case, when the company cannot sell then just blame the marketing division. Doesn?t it?
That means the lubricant business is very profitable?
It is from the very beginning. Its margin is very high. It?s not like BBM which has a small margin but its volume is very big. (End)