Pertamina to invest $2b in upstream sector this year

State oil and gas company PT Pertamina is trying to beat the rising competition by investing more in the upstream sector, where competition is scarce and returns are higher.

According to Pertamina's Vice President Omar S. Anwar, the company plans to increase its investment by 25 percent to Rp 22 trillion (US$2 billion) this year, 65 percent of which will be used to finance upstream investment projects.

The company plans to double its investment budget to Rp 41 trillion by 2012, again with a focus on upstream projects.

Omar said the company would focus its operation on the upstream sector, including the oil, gas and geothermal fields, because all the big industry players got their fortunes from their upstream operations.

?The future of the oil and gas industry lies in upstream sector, and we don?t want to be left behind. We have to focus on that sector as well," Omar told The Jakarta Post on the sidelines of the Asian Development Bank?s (ADB) annual general meeting Saturday.

He added the upstream sector offered higher returns than the downstream sector, which is more competitive, with more market players.

Pertamina?s returns from its downstream operation average between 5 and 10 percent, while returns from the upstream industry reach 50 percent. ?Our downstream operations require a lot more work, especially in infrastructure. But the returns are much lower,? Omar said.

Pertamina, he went on, would not do all its upstream development alone. It would seek outside partners to develop its upstream businesses, joint acquisition, joint management and joint bidding on new areas, including overseas oil and gas fields.

However, Omar noted although Pertamina?s future focus would be on the upstream sector, it would continue to maintain downstream operations and keep a market share at the level of around 60 percent. (*)