Pertamina's planned acquisition of Repsol-YPF assets to improve its role in upstream business

State oil and gas firm Pertamina's plan to acquire assets belonging to Repsol-YPF (formerly YPF-Maxus) will boost and restore Pertamina's prominent role in the upstream oil and gas business in the country following the scrapping of all Pertamina's licensing and controlling rights over oil and gas industry.

Pertamina's upstream director Gatot Karyoso Wiroyudo said that that the acquisition of Repsol-YPF assets in Indonesia would automatically boost Pertamina's reserves by 3 trillion cubic feet of gas and 600 million barrels of crude oil.

"Pertamina will then be able to produce crude oil of up to 150,000 barrels per day," Gatot said.

According to Pertamina president Baihaki Hakim, Repsol-YPF has seven blocks, of which only two blocks are currently producing oil and gas, namely the Southeast Sumatra and Northwest Java (offshore) blocks.

Pertamina actually wanted to buy the two productive blocks, but Repsol-YPF wanted to sell all the seven blocks in one package.

Baihaki said that it is still possible for Pertamina to acquire all the seven blocks, at a price of US$800 million, as Pertamina could still explore for oil and gas in the remaining unproductive blocks to increase Pertamina's reserves.

A number of lawmakers have opposed Pertamina's planned acquisition of Repsol-YPF assets. Harri Salman Farizi Sohar of the Golkar faction, for instance, suggested that the $800 million fund be used to build oil and gas piping project rather than to acquire Repsol-YPF assets.

Meanwhile, Baihaki said that the acquisition of Repsol-YPF assets would automatically increase Pertamina's reserves without conducting oil and gas exploration. He noted that it would cost Pertamina around $4 to $5 to find one barrel of crude oil. "Even that, it's still gambling."

When asked about the funding, Baihaki said that Pertamina had three alternatives, namely using its own money, or through strategic alliance or through debt financing.

Argentina-based YPF-Maxus was acquired by Repsol of Spain in 1999, and then it was renamed Repsol-YPF.

Repsol-YPF is Pertamina's second largest oil production sharing contractor after PT Caltex Pacific Indonesia. Maxus produced an average of 122,652 barrels per day (bpd) of oil in January this year, compared to 591,386 bpd produced by Caltex.

Unlike Caltex whose oil fields are located onshore the Sumatra island, mostly in Central Sumatra, Repsol-YPF produces oil from offshore oil fields. Repsol-YPF, in fact, is the country's largest offshore oil producer, followed by Conoco (with oil output of 61,440 bpd) and Unocal (58,596 bpd). (*)