Pertamina to invest $5 billion to strengthen upstream sector

State-owned oil and gas company Pertamina will invest US$5 billion in the coming five years to strengthen its upstream sector like building oil reserves and boosting the production in order to face the foreign competition. Pertamina?s monopoly to sell fuel on the domestic market will end in 2005.

So far, Pertamina has concentrated more on either the downstream sector or infrastructure. This activity is not yielding proper economic benefits for the company and now the Pertamina is a limited liability company, Pertamina?s president director Ariffi Nawawi told Bisnis Indonesia newspaper in Bandung over the weekend.

?In the coming two years, foreign companies will sell fuel in Indonesia. Therefore, Pertamina, which has now become a limited liability company, must strengthen its upstream sector,? Ariffi said at Bandung Institute of Technology (ITB) in Bandung.

According to Ariffi, the $5 billion investment will be used to strengthen both the upstream and downstream sectors with a composition of 70 percent for upstream sector to boost production and reserves and the remaining 30 percent for the downstream sector especially infrastructure.

Since Pertamina may not be able to fund the 100 percent of the huge investment on its own, it may invite foreign investors to form a strategic alliance to cover a part of the investment, he said.

But the country?s investment climate must be conducive -- especially in terms of security and a long-term guarantee on the nationalization of oil and gas sector-- for the foreign investment, he said.

Eurobond delayed

Meanwhile, Pertamina?s new board of directors decided on Friday to delay the $500 million eurobond issue, which was scheduled for the December 2003, Kompas newspaper reported on Monday.

The bond issue was planned by the Pertamina?s previous board of directors to boost the oil stock reserves and develop the promising gas field.

The current board said it needed time to study the bond proposal.

?Because of this (time to study the proposal), the bond plan which was scheduled for the end of the year, would be delayed, Pertamina?s commissioner Roes Aryawidjaja said in Jakarta.

Pertamina, which became a limited liability company in line with the Law No. 22/2001, recorded an over all gross profit of Rp 14.11 trillion profit ($1.66 billion) in 2002. (*)